Capitals used to be a fancy way to talk in Club Penguin. They stood out more than regular letters, and they attracted attention. Pookies, mumus, biggies, uppies and more, almost everyone in the pookie community used capitals.
To use capitals, penguins would simple capitalize the first letter of every word, and they would often add an exclamation point (!) at the end. For example, they would "Talk Like This!". Capitals were very popular. Most of the time, rare mumus would completely ignore pookies that didn't speak in capitals, and would only pick "capitalized" pookies, and vise versa.
However, the Club Penguin chat filters do not allow capitals anymore. The player can still talk in capitals, but no one can see it besides the player.