Short answer. Only the penalty changes. A commutation substitutes a lighter or different sentence for the original one, but the judgment of guilt stands. The person remains a convicted offender, and the record of the conviction is not wiped out by the substitution of a shorter term.
What the law says
The commutation of the original sentence for another of a different length and nature shall have the legal effect of substituting the latter in the place of the former.
Revised Penal Code, Article 96 — Effect Of Commutation. Read the full provision →
Substitution, not erasure
The Revised Penal Code describes commutation in one careful sentence, and the operative word is substituting. One penalty is put in the place of another; nothing is said about the finding of guilt, because the finding is untouched. The article also allows the replacement sentence to differ not just in length but in nature — a longer deprivation of liberty may be exchanged for a shorter one, or one kind of penalty exchanged for another altogether. From the moment commutation takes effect, the new sentence is the one being served, and the original is spent.
How commutation differs from a pardon
People use the words interchangeably, and they should not. Commutation reduces or alters the punishment while leaving the conviction and its consequences in place. A pardon is an act of forgiveness, and depending on its terms it can go further and remit the punishment altogether. Even a pardon, however, does not by itself undo the fact of conviction or restore everything the conviction took away, unless the grant expressly says so. Amnesty is different again: it operates on classes of offences and looks backward at the offence itself. If a document offered to a family is described loosely as "clemency," the exact word used in the grant matters enormously.
What survives the commutation
Because the conviction stands, its collateral consequences generally stand with it. Accessory penalties attached by law to the principal penalty continue to operate according to their own terms, and disqualifications flowing from the judgment do not disappear merely because the term of imprisonment was shortened. Civil liability is a separate matter entirely — the obligation to indemnify the offended party arises from the offence and is not extinguished by an act of executive clemency. So a shortened sentence does not close the file with the private complainant, and it does not by itself restore rights lost as an effect of conviction.
Who grants it, and what it means for records
Commutation is an exercise of the President's constitutional power of executive clemency, extended after final judgment, usually on the recommendation of the board that reviews clemency petitions. It is discretionary. No prisoner is entitled to it as a matter of right, and nothing in the Code creates a formula by which good conduct converts into a commuted term — the separate credits for good conduct in detention operate on a different footing. For the released person, the practical point is the one this article settles: a criminal record subsists, and any later question that turns on prior conviction — recidivism, habitual delinquency, disqualification from an office or a licence — is answered on the footing that the person was, and remains, convicted.