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Other Q&A sites like StackOverflow have pretty clear rules about their reputation system.

How exactly does reputation work for this forum?
AFAIK, I get +1 rep when someone upvotes one of my posts.

However, there is also a "Favourite" feature which isn't as clear as the upvoting one. How does getting favorited affect reputation?

Also, do I loose reputation when an upvote is undone?

What about getting flagged? I don't think this is a problem with this community, but it'd be nice to have some insight into how this would be handled. (SO "punishes" users by removing reputation when a post is flagged as spam/offensive.)

You get 1 reputation point for each upvote; if the upvote is undone, the point is removed as well. I'm not sure if banning has any effect on reputation, it's pretty rare here anyway (basically just for spam accounts that don't have any reputation to lose). Favorites are just bookmarks basically, I don't think they affect reputation either.

Your reputation is strictly the number of upvotes you have on all your posts. Favorites don't have anything to do with it.