Teachers are asking how they can design and use their own badges in their own courses.
Currently, badges can only be defined at a school (domain) level. They can be configured to be manually (see Customizing Buzz <badge-list><badge>) or automatically (see Customizing Buzz <autobadge-list><autobadge>) assigned.
The ability for teachers to design and use their own badges would be a great future enhancement. Thanks for considering it.
How do you set them up to assign automatically?
You would implement it via Admin > Configure > Customization. The Customizing Buzz <autobadge-list><autobadge> document provides some instructions. At the bottom of the page, also check out the Badge Definition Files section.
Teachers can then assign an autobadge with the completion of a folder/unit or course. This means that the student automatically receives the badge once all activities in the folder/unit or course is completed.
Since this thread is so old I imagine you both already know this, but teachers can now create their own badges.
See How do I create course badges?
How can I add a badge to an activity and auto assign it to students who already completed the activity? Can I tell the system to regrade?