I imagine most karate schools today have some form of jiyu kumite - free sparring - in their training. I'm sure it is emphasized in some places more than others, while the rules vary quite a bit from style to style. I'm also sure that noboy has a "no rules" jiyu kumite. (Why? Becasue if you free-fought without rules your practice wouldn't last very long - nobody can take eye gouges, groin kicks, small joint locks, etc. all together without an unacceptably high rate of injury).
There is a fundamental problem with fighting with rules - no matter what the rules are, they change the way the game is played. For example, in kyokushin, historically, punches to the face weren't allowed. That significantly alters the stances used when compared to, say, kickboxing. Kyokushin fighters held their hands lower, defended differently, etc. Or compare an MMA fighter to someone fighting in a real no rules streetfight. Look at their stance - often we'll see MMA fighters standing square to their opponent with legs spread slightly. They do that to help defend against the takedown. Do you think that stance would be as popular if groin kicks were allowed? Or think about a BJJ guard. I know that art was developed for streetfighting, but it really seems vulnerable to groin attacks. Perhaps groin strikes weren't used by people fighting for honor on the streets of Brazil.
Regardless of what "rules" are imposed, certain fighting styles will gain an advantage. If you don't allow strikes to the head, nobody's going to fight with their hands in a high guard, up by their cheeks. If everyone wears big gloves nobody's going to base their strategy on pressure point techniques.
You have to figure out what game you want to get good at playing - do you want to have the skill set of a streetfighter? A bar brawler who usually fights with a limited (but not empty) set of rules? A kickboxer? A point fighter? A cage fighter? I have nothing against any of those choices - I personally (for no rational reason) want the skill set of a K-1 f ighter, even though it's unlikely I'll ever step into a ring.
Depending on what you want to be good at you may or may not be able to spar with those same rules all the time. Even kickboxers don't really do ring-style kickboxing all that often - they usually wear headgear and extra protection for sparring purposes, at least a majority of the time. MMA fighters do most of their sparring with extra protection as well (you see funny results from that - watch how lots of MMA fighters guard - they'll hold their fists in place up in front of their face. Sadly, this works much better when you wear full boxing gloves, as they do in sparring, than with 4 oz. gloves, so they'll sometimes get hit, hard, and not know what happened. I've seen Tito Ortiz do that a bunch of times. The strategy that worked under the "rules" of big glove fighting didn't work under small glove, cage "rules.")
If you can't fight under the "real" rules (the rules of your chosen game) then you have to be careful. It's natural to want to "win" while sparring. You want to score points/ tap out/ beat up your opponent. The problem is that sometimes the strategies that can get you a "win" in a sparring session (whether or not you keep score) don't make you better where you wnat to be better - in the "game" that really matters to you.
That's what I mean by cheating - not breaking the rules of the "game" you're playing, but taking advantage of those rules to gain an advantage.
If you want to be a good streetfighter but in the dojo you do kyokushin style full contact karate, then you have to avoid the temptation to "cheat" by leaving your groin and head exposed. Covering those areas will make you worse at kyokushin fighting - because your target areas will be more exposed - but leaving them open will give you bad habits that won't translate well to the street. If you want to be a cage fighter you CAN afford to leave your groin open, but you CAN'T afford a stance that leaves you vulnerable to takedowns, even if on that day you're training boxing. You have to box with a wider, more square stance, ready to sprawl at any time, even though that makes for bad boxing.
I'm not arguing that your goal should be to be a better streetfighter or cage fighter or point fighter - only that you should pick something as your target and train accordingly. Then, if you want to be a good cage fighter but you're in a school that does point fighting, resist the urge to "score" using little slappy hits, even if other people fight that way, and focus on only using strikes landed from a position and body alignment that would let you put real power into them.
In my style we exempt green belts from headstrike - we give them a sort of breaking in period where they have less to worry about while fighting. Some of them fight with their hands held at chest level - and when fighting them it's easy to let one's hands drop. I try to fight that urge - to keep my guard high, as if defending against a head strike, even when my opponent can't use one, so as to keep my habits sharp. My goal is to be good at fighting my peers, who are allowed to punch and kick me in the head!
In short: do your best while sparring, but don't fall prey to habits that translate poorly into the domain you wish to master. Even if you can "get away with" certain things while sparring doesn't mean you should - especially not if it's going to make you vulnerable in the type of fight you care about.