Reputation is based on how you conduct yourself in Live. To get higher rep, you need others to vote you up, thus increasing your star rating. It's basically an indicator to show whether people prefer or dislike playing with you online. Check your rep by using your Guide button and follow the prompts.
Also once you are voted as a preferred player by someone else, Live will try and make sure that both of you get paired as often as possible in random online matches. Higher rep folks are also recruited to ease newbies into experiencing Live for the first time during last E3/CES, basically to show those who are new to the Live experience, what Live is capable of. That what i did during E3/CES last year, helping newbies get into the experience. Mind you, we want to portray good first impressions about Live experiences, so starting off with matches filled with testosterone-high males shouting profanities and hurling insults whenever you cant match up to their skills is a big turnoff for new players. That's where we come in.
I basically did that with Rezalida, altho not to the extent i went with those new guys during E3/CES period. Those folks are totally green, and know next to nothing about what Live is capable of, so we have to coax them , and slowly guide them through all the Live experiences. Basically be their buddies for that period of time, until they feel comfortable navigating Live on their own. Like a baby bird ready to leave the nest.

Which is the reason why my friends list is full, i still have these "used to be newbies" in my list, they are now more than able to hold their own in any online matches, so im glad they took flight with flying colors. You sorta grew with them and get strong friendship bonds with them, and it's hard to let them go and delete them off your Friends List. *cries* My wittle baby bird.....alll grown up and kicking serious asses in Gears of War!

now i understood......
thanks man...