Yes, they can. Each panel is removable. When we first bought it I thought they weren't and was really disappointed, but looking at it further I realized you just have to remove each panel the opposite way of the previous (first one you push up, the next one you push down, and so on, since that's how they lock together).
yes, panels do come apart individually (not easily, though). That being said, however, any less than 6 panels is not feasible and I've seen on-line that the manufacturer stated any shape other than a hexagon is unstable. My grandson has just learned to stand holding on; my son has his play yard set up as a rectangle and now that the baby is standing and leaning on one side, it does not seem as sturdy. We're going to have to try it as a hexagon shape.
The 8-panel play yard is actually made of four pairs of panels. You can remove a pair of panels at a time to reduce the size to a 4-panel or 6-panel play yard depending on your needs and available space.