Karma is a word everyone knows, yet few in the West understand what it means. Westerners too often think it means “fate” or is some kind of cosmic justice system. This is not a Buddhist understanding of karma, however.
Karma is a Sanskrit word that means “action.” Sometimes you might see the Pali spelling, kamma, which means the same thing. In Buddhism, karma has a more specific meaning, which is volitional or willful action. Things we choose to do or say or think set karma into motion. The law of karma is a law of cause and effect.
Sometimes Westerners use the word karma to mean the result of karma. For example, someone might say John lost his job because “that’s his karma.” However, as Buddhists use the word, karma is the action, not the result. The effects of karma are spoken of as the “fruits” or the “result” of karma.
Teachings on the laws of karma originated in Hinduism, but Buddhists understand karma somewhat differently from Hindus. (The About.com Guide to Hinduism, Subhamoy Das, here explains karma from the Hindu perspective, if you want to compare.) The historical Buddha lived 26 centuries ago in what are now Nepal and India, and on his quest for enlightenment he sought out Hindu teachers. However, the Buddha took what he learned from his teachers in some very new and different directions.