Ok here's how it works- scan the ship and one of these things appears next to the ship name/type/rank etc.
Clean- killing these gets you a bounty, notoriety and sys sec chasing you until you kill them as well. It's a good idea to stop when ATR turn up though. Don't shoot unless you're a murderhobo like the OP.
Wanted- Target has a bounty available in the current system. Shoot for fun and profit.
Lawless- You're in a CZ or anarchy system. Shoot for fun and profit. (Maybe pick a side first if it's a CZ. Killing everything is still an option though, just not the best one).