I am a moderator for a very popular site which has had reputation for a few years. The way it works is anyone can "rep" a post they feel is constructive or helpful or humorous, etc, and "neg" a post which is offensive, rude, etc. Join date, post count, and current rep level all factor into how much "rep power" someone has. Newer members typically have a very low power which takes quite a while to increase.
For the first few years, rep led to much higher quality posts, and strongly encouraged creativity (people who made clever photoshops, or very helpful posts were repped by everyone)and enhanced user experience, but soon people began to attach a sense of worth to their repbars and reppowers. They started repcircles and repped the same people repeatedly, so the majority of points were concentrated with a few members.
Once in a while, clever posts would be rewarded with a rep, but that rep was one that was not given to a friend. We would moniter reppower frequently, and catch people that were repeatedly "repwhoring," but it became very sophisticated, with massive circles forming in odd subforums which we couldn't exactly punish. People were afraid to anger "powerful" posters with differring opinions as it would risk them negative reputation, many other scenarios, etc.
The equation or rep formula should be made with great care, but even then, eventually you will have some very powerful members repping each other for about 10,000 points while new members will start down at 20 points. You might modify the formula so that their power is reduced to 1000 points, but the newer members will suffer even more, with a rep power of just two points.
Something not intrinsically valuable can potentially change the way a site works. If you've already got people spamming "hi" "good game" "fun" for increased AP, and that's hard to fix, policing rep will become a bigger hassle.
