The word Karate is derived from the words:
Kara meaning "Empty", and Te meaning "Hand".

Kara also means "Chinese", and the original meaning of the word karate was
"Chinese Hand" because of its origins in Chinese kempo. However, Gichen
Funakoshi, the Okinawan master who brought karate to Japan and developed
Shotokan karate believed that "empty" better described the meaning of
karate:

The Kara that means "empty" is definitely the more appropriate. For one
thing, it symbolizes the obvious fact that this art of self-defence makes
use of no weapons, only bare feet and empty hands. Further, students of
karate-do aim not only toward perfecting their chosen art but also toward
emptying heart and mind of all earthly desire and vanity. Reading Buddhist
scriptures we come across such statements as "Shiki soku ze ku" and "Ku soku
zeshiki," which literally mean "Matter is void" and "All is vanity." The
character Ku, which appears in both admonitions and may be pronounced Kara,
is in itself truth.

The word Budo is derived from the words:
Bu meaning "Martial" or "Combat", and Do meaning "Way" or "Path".

Budo, the Martial Way, is a Japanese term for arts that use peaceful combat
as a means of perfecting the self. The word Do comes from the Chinese word
Tao and the philosophy of Taoism. Do does not mean the "way" or method of
learning something, such as the learning the techniques of karate, but
rather it is the path of life whereby what is learned is transcended into
wisdom. Do and Zen are complimentary. Zen seeks self-perfection through
passive means, such as meditation. Do seeks self-perfection through active
means, such as the training itself. In fact, the practice of kata is
sometimes referred to as Dozen, or "Moving Meditation". That which is gained
through Budo is much more than just the techniques and applications of the
martial arts, and it transforms all aspects of life.

Karate and Budo are sometimes combined as Karatedo, or the "Empty Hand Way".