Well, I've see a lot of people asking questions recently about what Karma is and how it works, so I thought I'd write this to try and help people who weren't 100% clear about it all.
Karma: The Basics:

In a nutshell, Karma is something that other uses can give, or take away from you. They do this by using the following boxes:
The Purple box means that a user will give you Positive or Negative Karma, and the Red box means that the user will report a post that has been made. To distribute Karma, you must click on the Purple box in the post that you would like to give karma to, tap in your reasons why, choose whether you approve or disapprove and hit the confirm button. You must also have been giving karma out before you can give it to a person more then once. this is to stop people from giving someone endless amounts of Good/Negative Karma.
So, what happens when I give/receive karma?
The Blue Boxes:
The Blue Boxes represent POSITIVE Karma. Everyone starts off with one blue box, like so:
This could be referred to as 'Neutral'. After receiving 100 points of karma, you will get another box:
(Also, is you receive karma from someone, and your points don't go up nor down, then the person that gave you karma must have neutral karma. In other words, not enough points to change your count)
And so on and so forth. If you are an extremely helpful member, and receive a lot of karma, you may end up with a full, blue colour range bar, looking like so (From then on, it takes 200 points to receive your next navy blue bar):
(Also as a side note: The more karma a person has, the more points they give out. For example, someone with 8 karma bars will give out more points than someone with 2)
You can check how much karma you have by clicking on the 'User CP' link at the top of any page on
FC.com.
The Red Boxes:
The red boxes convey NEGATIVE karma. This is the feature used to distribute bad karma to spammers, flamers etc. etc. The red boxes work in the exact same way as blue boxes, and a full bad bar looks like so:
Although this is used to report people mainly, some people much prefer the red to the blue, so are well respected members of the community, just wanting a different colour other then blue boxes.
The Grey Boxes:
Grey boxes are usually a rare find. But when you do come across them, they look a little bit something like this:
All this means is that this user has the Karma feature disabled, but can still give, or receive karma.
So, how does Karma affect me?
Well, in all honesty, Karma really doesn't affect you in any way at all. It doesn't limit or expand how much you can post or your limits on
FC.com, its just a way people can praise others, punish others, or just make their Karma bar look pretty.
The one thing people get worried about is the fact that if they don't have good karma, then they won't be very well respected etc, but this isn't the case. Karma is completely harmless.
I hope this helped with a few queries about Karma.
Rik
PS: Thanks to Shido for the 'Got Karma?'.