Your Karma starts at 1000 and goes down if you damage players who are on your own side. It goes down less if their Karma is lower.
If your Karma is low when a round starts, you get a penalty to your damage that round.
By playing clean rounds where you don't harm teammates, you regain Karma. Innocent also get some for hurting Traitors.
The Karma value shown on the scoreboard updates only after the round ends. During a round, someone's true Karma might be lower.
Check the full Help for more details.