I haven't implemented this system, but I do believe it serves a good purpose. One of the reasons forums are so successful is that they promote information exchange. A reputation system allows new members to quickly find out which members are most likely to post meaningful topics and responses.

I think it's great and it also breeds competitiveness within the community.

The pros: people feel "important" after getting a good rep. If done properly, then you could indeed have some members "promoted" for being nice and useful. I'd think about letting only admins and mods modify the karma since they are usually more objective.

As for the cons: they derive from the idea above: if all members could give karma/rep, then you could have people abusing it. It could then turn against you.

I am still thinking about putting a hack for this or not ... So far I have chosen to NOT have such feature. I reward my best members with the "Member of the Month" program.