The Pali term Karma literally means action or doing. Any kind of intentional action whether mental, verbal, or physical, is regarded as Karma. It covers all that is included in the phrase "thought, word and deed". Generally speaking, all good and bad action constitutes Karma. In its ultimate sense Karma means all moral and immoral volition. Involuntary, unintentional or unconscious actions, though technically deeds, do not constitute Karma, because volition, the most important factor in determining Karma, is absent.
The Buddha says:
"I declare, O Bhikkhus, that volition is Karma. Having willed one acts by body, speech, and thought." (Anguttara Nikaya)
Every volitional action of individuals, save those of Buddhas and Arahants, is called Karma. The exception made in their case is because they are delivered from both good and evil; they have eradicated ignorance and craving, the roots of Karma.
"Destroyed are their germinal seeds (Khina bija); selfish desires no longer grow," states the Ratana Sutta of Sutta nipata.
This does not mean that the Buddha and Arahantas are passive. They are tirelessly active in working for the real well being and happiness of all. Their deeds ordinarily accepted as good or moral, lack creative power as regards themselves. Understanding things as they truly are, they have finally shattered their cosmic fetters – the chain of cause and effect.
Karma does not necessarily mean past actions. It embraces both past and present deeds. Hence in one sense, we are the result of what we were; we will be the result of what we are. In another sense, it should be added, we are not totally the result of what we were; we will not absolutely be the result of what we are. The present is no doubt the offspring of the past and is the present of the future, but the present is not always a true index of either the past or the future; so complex is the working of Karma.It is this doctrine of Karma that the mother teaches her child when she says "Be good and you will be happy and we will love you; but if you are bad, you will be unhappy and we will not love you." In short, Karma is the law of cause and effect in the ethical realm.(http://www.buddhanet.net/e-learning/karma.htm#1)