When killing a flagged player(with purple name) you get +1 PvP kill.
When killing an innocent player, you get karma(red name), if you die with karma there is a chance for some of your equipment to drop.
To remove karma you need to kill monsters.
On pvp kill player has a chance to get enchant/attribute/chest/life stone/fame.
After reaching some certain pvps, the character has his name changed.