The main purpose of the Reputation system is to regulate combat between players, so that a player will think twice before attempting to kill or rob an inexperienced or law-abiding character. Note that none of the caveats below apply to members of two adventuring guilds at war.
Creatures (including NPCs, monsters and animals) are all color-coded according to their moral standing. This color can be seen in the creatures' names, and when you’re in War mode the creatures themselves will appear as this color when you pass your cursor over them.

• Blue: The innocents of the land. Attacking blue creatures will have a negative effect on your Karma.
• Gray: These are Criminals or Aggressors. Attacking gray creatures may or may not have an effect on your Karma.
• Red: Murderers and aggressive monsters are red creatures. Dispatching them can do nothing but improve your Karma.
• Green: Indicates this player or pet is in your guild.
• Orange: Indicates this player or pet is in an enemy guild.

All of these colors are customizable in the Options menu.