It's kind of a catch 22 depending on the niche... awarding for participation is not a bad idea..... the problem is you need to award for "good" participation. Simply awarding based upon post counts won't qualify. Awarding based upon posts that are valid answers (or is upvoted) is.
Same with creating articles... creating an article that gathers a lot of views and awarding that is good for the site and the user... awarding someone for creating low content articles for the site is not.
Now as to what you "award" them.... that can be banners, or even physical items (like for my niche branded t-shirts, hats, red lights, etc).