The Buddha's definition is precise and radical: "It is intention (cetana) that I call karma. Having formed the intention, one acts through body, speech, or mind." This identifies karma not with the external action but with the volitional mental state from which action flows. The same external act can be karma of very different qualities depending on the intention behind it. A surgeon's knife and an assassin's blade perform the same physical motion; the karma is entirely different. This makes karma a matter of psychology rather than ritual or social status.
A common misunderstanding treats karma as determinism: every event in your life is the predetermined consequence of past actions, and your present actions are themselves determined by past karma. The Buddha explicitly rejects this. Past karma is one among many factors that condition present experience — alongside physical laws, biological inheritance, and the social environment. Present karma — present intentional action — is itself a cause that shapes future experience. The path of practice is possible precisely because present intention is not entirely determined by past intention.
Karma should not be understood as a judicial punishment or divine reward system. It is better understood as a natural consequence: actions rooted in greed, hatred, and delusion naturally produce mental states characterised by greed, hatred, and delusion, which in turn produce suffering. Actions rooted in generosity, goodwill, and wisdom naturally produce mental states characterised by generosity, goodwill, and wisdom, which produce wellbeing. The mechanism is psychological rather than theological: you are not punished for your anger; your anger is itself the punishment, and the mental habits it reinforces become the seed of future suffering.
The Buddhist concept of karma differs importantly from the Hindu concept, with which it is often conflated. In Hinduism, karma is often tied to caste, ritual, and the self (atman) that transmigrates from life to life. Buddhism rejects the permanent self and redefines karma purely in terms of intentional mental action, making it a doctrine about the phenomenology of mind rather than a metaphysical claim about souls and cosmic justice.