Challenges are in-game activities that have been in every game of the Borderlands series, with the first game's awarding the player with XP. These Challenges range from killing enemies to dealing a certain amount of elemental damage, and even finding secret areas, as well as plenty more. As you progress through the main story and explore the game's world, more Challenges will become available.
Starting with Borderlands 2, Challenges would reward the player with Badass Ranks. Once you've gotten enough of these, you would get a Badass Token, which can be redeemed to raise one of five random attributes at any one time (out of 14 or so in total). Every attribute starts at a 1% increase, then reduces each time you go to raise it.
