In my class these points are given out (by me) for good behavior, although students can ask me to give them to classmates if they feel they've done something to merit it. At the beginning of the year we develop a list of things that points can be used to redeem. It's the usual stuff like a homework pass or trip to the treasure box (a.k.a. little junky stuff that kids love but parents hate). I also include larger ticket items like pizza or donuts and juice for the class. I assign significantly higher point value to these, so if the kids decide to redeem them they have to work together to pool points.
I have one rule with the points - once given I will never take them away. I tell the kids that even if they make a bad choice it can't take away the good things they have done. I think that's really important.