I completely welcome all comments; I don't think anyone "knows" this stuff, so I'm not ever going to have any ego in the game. This is something we're all looking at from our own perspectives and the best I can figure is that we all have to keep talking about what we see.
If you don't have a lot of time, just read the parts in bold. Those are the takeaways, filtered into my way of thinking and speaking.
Badges can serve several individual and social functions depending on the nature of the activities that a badge rewards and the application of badges in particular contexts.
The paper itself culminates with a concern that badges (or certain types of badges) aren't always right for every product and that there should be more research done on that aspect of badge implementation. That certainly makes sense to me.
PSYCHOLOGICAL FUNCTION: GOAL SETTING
Perhaps the most obvious function of badges is as a goal-setting device. Badges challenge users to meet the mark that is set for them. Goal setting is known to be an effective motivator, and experimental studies have illustrated that the most motivating goals are those that are just out of comfortable reach.
The fun and interest of goal seeking is often the primary reward itself.
Goal setting is most effective when users can see their progress towards the goal. Without signposts to mark the way, there is little or no feedback to keep users moving in the right direction. Furthermore, people often escalate their efforts when they know they are near their goal
To sum this up: The fundamental reason why gaming is fun is "Pleasurable Frustration." This is the human need to strive for success.
PSYCHOLOGICAL FUNCTION: INSTRUCTION
Badges can provide instruction about what types of activity are possible within a given system. Badges often embody the social norms of a system by exemplifying the types of activities and interactions that are highly valued, and in so doing provide a kind of social shaping of user activities.
Whether they earn the badges themselves, individual users can also gain a Gestalt understanding of the overall community of users.
To sum this up: Badges tell you what to do and what is possible to do.
PSYCHOLOGICAL FUNCTION: REPUTATION
Badges assist reputation assessments at several levels. At a general level, examining another user’s badges can provide a summary of interests and engagement levels, for example by indicating whether a user is a casual or fanatical community member
By providing an encapsulated assessment of engagement, experience, and expertise, badges can be an invaluable tool for determining the trustworthiness of other people or the reliability of content.
PSYCHOLOGICAL FUNCTION: STATUS / AFFIRMATION
The power of status rewards derives from the expectation that others will look more favorably upon someone who has undertaken the activity represented by a badge. More difficult achievements may be assumed to lead to greater status
They mark significant milestones and provide evidence of past successes.
The interplay between status and affirmation is important because it highlights how badges can be engaging from both an individual and a group point of view.
To sum this up: If people understand what it takes to earn a badge, those that earn them feel pride.
PSYCHOLOGICAL FUNCTION: GROUP IDENTIFICATION
Badges communicate a set of shared activities that bind a group of users together around shared experience.
Achieving badges can provide a sense of solidarity and increase positive group identification through the perception of similarity between an individual and the group.
To sum this up: Those that participate in a shared experience bond together.
BADGES MAY NOT ALWAYS BE "RIGHT"
Evidence suggests that badges are not universally appreciated, understood, or attended to.
The authors' in-progress research on FourSquare indicates that most users find only some types of badges interesting or motivational. Furthermore, just as some have questioned whether badges are actually counter-productive as game mechanics, the "corruption effects of extrinsic incentives" could make some badges harmful to intrinsic motivation.
To sum this up: Different people are motivated by different incentives.
The social aspect of gamification is, essentially, belonging. The more people can talk to each other with an understanding of the system that they are using (i.e. gamification), the better they feel about the system and their involvement within it.
Badges are useful tools for many systems and games. They create a bond for those that use them and can help a group follow the goals set out for it through the system's design. A shared knowledge of the meanings of the badges allows for pride and a sense of belonging.
It is my opinion that badges are only one part of the whole picture. There are many types of players / users and a well-rounded game system hits all of those types as equally as possible.