It could be "me da pena" o "me apena", both expressions can be heard in some Spanish speaking countries. The meaning: I feel sorrow, I'm ashame of . It's easy to mis a word or a vowel when you hear something in a language you're not familiar with. Anyway, it means that somebody is apologizing because he or she doesn't want to dance. "Pena" can be traduced as "pity; sorrow", but in some Latino-American countries "pena" means "shame". "¡Tienes una linda voz. Cántanos algo!- No...me da pena" could be a dialog. Notwithstanding, in Spain the answer would be : No... me da vergüenza".

7. f. Á. Caribe, Am. Cen. y Méx. vergüenza. RAE No, es que me da vergüenza bailar.

looks like if someone is shy about dancing or something ike that

"Me pena" doesn't exist in Castillian Spanish, but "me da pena" does, meaning "it makes me feel bad". So if a South American said this to me, I would think it was another way of saying "it's not that I feel bad about dancing". But context is needed to clarify it.

I don't know in other countries, but in Spain that phrase means nothing. Sorry