The word karma, like the word evil, is often used without understanding. Karma is not fate, nor is it some cosmic justice system. In Buddhism, there is no God to direct karma to reward some people and punish others. It is just cause and effect.
Theravada scholar Walpola Rahula wrote in What the Buddha Taught,
"Now, the Pali word kamma or the Sanskrit word karma (from the root kr to do) literally means 'action', 'doing'. But in the Buddhist theory of karma it has a specific meaning: it means only 'volitional action', not all action. Nor does it mean the result of karma as many people wrongly and loosely use it. In Buddhist terminology karma never means its effect; its effect is known as the 'fruit' or the 'result' of karma (kamma-phala or kamma-vipaka)."
We create karma by the intentional acts of body, speech, and mind. Only acts pure of desire, hate and delusion do not produce karma.
Further, we are affected by the karma we create, which can seem like reward and punishment, but we are "rewarding" and "punishing" ourselves. As a Zen teacher once said, "What you do is what happens to you." Karma is not a hidden or mysterious force. Once you understand what it is, you can observe it in action for yourself.
Don't Separate Yourself
On the other hand -- it's important to understand that karma is not the only force at work in the world, and terrible things really do happen to good people.
For example, when a natural disaster strikes a community and causes death and destruction, someone often speculates that those harmed by the disaster suffered "bad karma," or else (a monotheist might say) God must be punishing them. This is not a skillful way to understand karma.
In Buddhism, there is no God or supernatural agent that rewards or punishes us. Further, as I said, forces other than karma cause many harmful conditions. When something terrible strikes others, don't shrug and assume they "deserved" it. This is not what Buddhism teaches. And, ultimately we all suffer together.
Kusala and Akusala
Regarding the creation of karma, Bhikkhu P.A. Payutto writes in his essay "Good and Evil in Buddhism" that the Pali words that correspond to "good" and "evil," kusala and akusala, don't mean what English-speakers usually mean by "good" and "evil." He explains,
"Although kusala and akusala are sometimes translated as 'good' and 'evil,' this may be misleading. Things which are kusala may not always be considered good, while some things may be akusala and yet not generally considered to be evil. Depression, melancholy, sloth and distraction, for example, although akusala, are not usually considered to be 'evil' as we know it in English. In the same vein, some forms of kusala, such as calmness of body and mind, may not readily come into the general understanding of the English word 'good.' …
"…Kusala can be rendered generally as 'intelligent, skillful, contented, beneficial, good,' or 'that which removes affliction.' Akusala is defined in the opposite way, as in 'unintelligent,' 'unskillful' and so on."
I urge you to read all of this essay for deeper understanding. The important point is that in Buddhism "good" and "evil" are less about moral judgments than they are, very simply, about what you do and the effects created by what you do.
This essay provides the barest of introductions to several difficult topics, such as the Four Truths, shunyata and karma. If something I have written here makes no sense, please do not dismiss the Buddha's teaching without further examination.
I hope you will think about how you conceptualize evil. I urge also that you read this dharma talk on "Evil" in Buddhism by Zen teacher Taigen Leighton. It's a rich and penetrating talk originally given one month after the September 11 attacks. Here is just a sample:
"I don't think that it's helpful to think about forces of evil and forces of good. There are good forces in the world, people interested in kindness, such as the response of the firemen, and all of the people who have been making donations to the relief funds for the people affected.
"The practice, our reality, our life, our liveness, our non-evilness, is just to pay attention and to do what we can, to respond as we feel we can right now, as in the example Janine gave of being positive and not falling for the fear in this situation. It is not that somebody up there, or the laws of the universe, or however we want to say that, is going to make it all work out. Karma and precepts are about taking responsibility for sitting on your cushion, and for expressing that in your life in whatever way you can, in whatever way may be positive. That is not something that we can fulfill based on some campaign against Evil. We cannot exactly know if we are doing it right. Can we be willing to not know what is the right thing to do, but actually just pay attention to how it feels, right now, to respond, to do what we think is best, to keep paying attention to what we're doing, to stay upright in the middle of all of the confusion? That is how I think we have to respond as a country. This is a difficult situation. And we are all really wrestling with all of this, individually and as a country."