How does the karma system work, and what privileges are related to it?

Found the answer in the FAQ:

When a question or answer is upvoted, the user who posted them will gain some points, which are called "karma points". These points serve as a rough measure of the community trust in him/her. Various moderation tasks are gradually assigned to the users based on those points.

For example, if you ask an interesting question or give a helpful answer, your input will be upvoted. On the other hand if the answer is misleading, it will be downvoted. Each vote in favor will generate 10 points, each vote against will subtract 2 points. There is a limit of 200 points that can be accumulated per question or answer. The table below explains karma requirements for each type of moderation task.

• vote a question up -> 15
• flag a question -> 15
• add comments -> 15
• like a comment -> 15
• upload files -> 60
• vote a question down -> 100
• edit community wiki posts -> 250
• create a tag -> 250
• close own questions -> 250
• reopen own questions -> 250
• retag questions -> 500
• mark post as community wiki -> 2000
• delete comments -> 4000
• edit any answer -> 2000
• view flags -> 4000
• close posts -> 4000
• delete any comment -> 4000
• convert answer to comment -> 4000
• convert comment to answer -> 4000
• convert answer to question -> 4000