As you earn karma in different subjects (by answering questions, editing answers, getting thanks on your answers, etc) you level up and get higher level badges.
People on Socratic generally contribute to the site because they believe in our goal of making a free, open resource for learning. Karma is a (rough) measure of how much you've made Socratic a better place for learning. We want to build a community that's intrinsically motivated by this common goal, so karma isn't and will never be exchangeable for cash and prizes!
As we grow, we'll look to our community for help managing and moderating activity on the site. Members who've contributed a lot and have a lot of karma will certainly stand out, although we'll also look for people who share our mission and understand our values.