Karma is a way of rating users through their posts. This allows a more accurate rating and eventually will inspire trust for your most prolific and knowledgable users from newcomers. In a community based around knowledge or finance this would be a very good thing. For those communities that are purely community oriented karma is not as needed.

In my system, I allow comments on the Karma and these comments will help members improve over time. I felt comments were necessary because often times you would add something that doesn't really warrant a one-line post or doesn't add anything to the conversation.

Karma provides a way for members to police themselves and keeps moderaters from having to use heavy handed tactics to keep things within the guidelines.