When the actual nature of this topic can be discussed in full detail, this is a small example and the adding on of house rules can be fun and entertaing when everyones up to it. a fellow GM and i used the idea and it helped a lot in developing a certain uniqueness to each character. When a character makes up and plays out a certain unique action laced with style and dripping of sarcasm/humour/ just plain combat style you give them a marble/poker chip or something in the same line. They can then use this to boost and not reroll any roll as with Karma. They then are motivated to have unique style that makes the game more enjoyable.
This sprung out when our specific group was playing 7th Sea where this features as part of the game. Then i realized that awarding Karma was totally up to the GM and when players go fishing and they may convince you this makes a healthy alternative
When they dont deserve Karma give them drama dice.

Karma=Experience as Drama dice do not

Another difficulty im having is figuring out exactly when and how karma should be awarded WHILST STILL PLAYING.

Ideas, answers or what you do for the above ?

I tried a system like that for a while with a particular group of players, but it made the player's group somewhat hard to manage when two or three competed to show their Styletm and get their chip! We talked about it and they decided to let me give bonuses once in a while to characters that were very well played, but only when I felt like it. We knew each other real well and had played for long years together, me always GMing, so I guess the I've-known-you-for-a-long-time factor played.

Why not just award Karma Pool bonuses on the fly? Any Pool earned in this way is burned as soon as it is used, no matter what the reason, and bonus pool is the first to be used. Bonus Pool cannot be used for Karma Pool actions which would normally burn a point of Pool.

So, basically you end up with the same sort of 'chip' system, but you're using a mechanic which is already built into the game.

if you're going to award karma mid-game, you should probably do so at the end of a scene. when you plot out the scene, decide how much karma you'll give as a basic amount for surviving/winning (2 karma for suriving, +1 if they save Dana Damsel-In-Distress, etc.). then, as the characters play through the scene, jot down anything they do that might be worthy of extra karma (Joe Jockstrap pulls off an especially difficult shot, +1 karma). at the end of the scene, spell out how much karma each character gets, and why they got it (Joe Jockstrap, you get 2 karma for surviving, you get 0 karma for killing Dana Damsel-In-Distress with a stray round, but you get 1 extra karma for making a headshot in full darkness with no vision mods and an S wound).

this allows you to reward the players for things you want to encourage, as well--for instance, if you give a character 2 karma every time the player does something particularly in-character, the players might start playing a more character-oriented game.

Hmm... Style. I would tend to give experience/karma for style, the book for one system (I thought it was Amber, but cannot find it in the ADRPG book) had a list of what to reward; making the GM/Players laugh was one good reason, saving the party with quick thinking....

And my little idiosyncracy is awarding more karma to a character who minimises collateral damage. SSM-3 to the head of a CEO from 500m and then escaping without detection is worth about twice the karma of using C-12 to remove the South side of the building and then blasting your way out past 50 Red Samurai. Yes, killing 50 Red Samurai is difficult but you can bet your arse it was luck more than skill.

in SR, luck is a skill. or, rather, it's a pool!

But Lone Runner didn't want to award karma for these sorts of things. Karma is too much of a bonus (imo) to be dishing out whenever someone does something moderately cool or in character. That's why I suggested the bonus Karma Pool idea.

In another game system (a slightly modified Harnmaster), we used Fate Points. Whenever someone did something cool, they got an FP. That point could then be spent to re-roll something, and that reroll was guaranteed to be of a higher success level than the original (there were 4 levels of successes; critical failure, moderate failure, moderate success, critical success). This is the sort of thing that Lone Runner was looking for, at least as he described it. SR already has that kind of system in place with the Karma Pool, and so it makes sense to fiddle with that if you really want to use a separate reward system.