How do Penn State and MIT compare for admissions chances?

Your read is basically correct: for most applicants, Penn State is in a very different admissions tier from MIT. MIT is one of the most selective schools in the country and is a reach for nearly everyone, including students with near-perfect grades, top course rigor, and exceptional STEM accomplishments. Penn State is selective, but for a strong student it can be much more realistic.

MIT is the kind of place where being academically qualified is only the starting point. The students who are most competitive there usually have unusually strong math and science preparation, very high-level problem-solving ability, and evidence that they do things beyond simply earning top grades, such as research, advanced projects, Olympiad-level achievement, or deep technical engagement. Even then, many outstanding applicants are denied because the bar is so high and the applicant pool is stacked.

Penn State fits a different applicant profile. A student with solid to strong grades in a good college-prep schedule, respectable testing if submitted, and a record that shows consistency and readiness for a large public university often has a plausible shot. Some majors are more competitive than others.

If you are comparing them purely on admissions difficulty, MIT is not just a little harder. It is dramatically harder. A student who would be a realistic applicant for Penn State might still be nowhere close to competitive for MIT, while a student who is competitive for MIT would almost always be academically viable for Penn State.

Penn State can function as a target or possible target for many strong applicants, while MIT should be treated as a high reach regardless of how strong your numbers are. The two schools are not close in selectivity.