The higher your reputation the more likely your allies will honor their alliance (trusted ally) and the more you will be liked in general.
The diplomacy file also seems to contain reputation settings, but I'm not sure how to read them.
Diplomacy is sometimes really strange. I was at war with the Polish and winning easily. They kept trying to make peace with me (their priority was peace) but kept demanding 60k or more in exchange. They were bankrupt but still had a 'supreme' military rating. I tried initiating peace talks as well but they weren't interested; it kept coming up as 'demanding' and even when I tossed in a few regions and wads of cash to make it 'balanced' they rejected it outright every time.
I then decided to demand vassalage from them. To my surprise the simple vassalage agreement came up as 'balanced' and they accepted right away. I tried the same trick on the Hungarians and turned them into a protectorate as well. Strange.
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