Detailed during an Iwata Asks interview with series producer Hidekki Konno, the community feature of Mario Kart 7 aims to replicate the concept of groups and communities found in other networking services, not unlike the groups found on Steam. It allows players to create and title their own groups, create specific group rule sets, and share the group with friends and allow all to race together under the one banner.
For example, it would be possible to create a 'PALGN Mario Kart 7 Group', where we could enforce such rules as only playing on a specific series of tracks, locked at 150cc with standard karts only, and all but the basic items turned off (no overpowered blue shell!). This would generate a fourteen digit code that other Mario Kart 7 users could enter, allowing them access to the PALGN Mario Kart 7 Group and the ability to race alongside other PALGN Mario Kart 7 players.
Created communities can be shared publicly, or set to private if the need be, and will include online leader boards for community members to share and compare their track times and winnings. Additionally, the Mario Kart 7 application, which will be installed on the 3DS, will display the top one-hundred communities, allowing the best communities to strut their stuff in front of the rest of the world.
A welcome step in the right direction, Mario Kart 7 in all it's online glory will be available later this year on the Nintendo 3DS. The full interview with Hideki Konno can be seen below.

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