What makes karma valuable?
I think its primary function is a commodity for bonding and shaping the group, i.e. like economics or information flowing on a network.
But seriously, on the micro scale, earning a single karma point feels good because it means somebody appreciates what you said. On a macro level, it lets you compete with other people, and serves the same purpose that high scores in video games do. Humans respond very well to an abstract notion of wealth, and humans are naturally competitive.
[citation needed]
This is a direct democracy, which has some shortcomings, particularly in voter apathy and the promotion of self-interests, where voters put their own needs before the needs of the whole. As the population of a direct democracy grows, it becomes increasingly difficult to accurately represent the will of the people (successful direct democracies usually emphasize consensus over majorities).
These problems are addressed in a representative democracy, where representatives are elected to vote in place of the people, as in the case of Congress or Parliament.
I believe that as online communities grow, voting systems begin to fall apart because the votes cease to represent the will of the community as a whole (the special interest groups take over the site). A common way website owners deal with this problem is by bringing in moderators or by somehow weighing votes based on some criteria, seniority or otherwise.
But I digress...
Karma is there to give people power over the direction of the community. Without karma, you would have no control over what you see, much like state-run media.
But it could be that it's just a crude mental hack that we substitute for all the normal social signals we get when we socialize in person. We can't smile, frown, applaud, backslap, suddenly remember a previous engagement, or cough pointedly here. Even a deliberate change of subject is hard to pull off when the posts appear in arbitrary order. All we can do is use karma.
That's why there's the effort to keep fluff posts out; it changes it from being "hacker karma" to "interesting karma" at best and "amusing karma" at worst.