Wheel size has a significant impact on the distance and speed measured by Karoo when the speed sensor is connected. The correct wheel circumference depends on several factors like rim size, tire size, internal rim width (bead to bead), tire pressure, etc. The default wheel size Karoo assumes if you have not changed the wheel size is a 700c rim, mounted with a 25c tire inflated to 80 psi, which is 2111.15 mm. You can see this in Settings > Bike Profile > Wheel Circumference.
If this is not the wheel size you are using, please consult this url for the the correct value to input: http://www.bikecalc.com/wheel_size_math
In case no speed sensor is connected and Karoo is being operated purely on GPS, the wheel size is not a significant input for speed and distance.