#02: Leveling Up AKA Experithar

About the Mechanic:

Within the context of a work, the levelup mechanic simulates the player character practicing something; the character's ability as a result is represented as a level (Lv. for short), while steps towards advancing the level are noted as experience points (XP for short.)  More usefully, the numeric parts of this mechanic often operate as feedback unto itself; typically an entity that is Lv.3 is less effective than one that is Lv.15.  If you have 80% of your XP bar full, you know you have a short way until your next reward (the next levelup.)

The 'skill' players are taught is to prioritize learning where or how to more efficiently gain XP.  Levelup mechanics work against the mechanics they are keyed to, and instead train players to be more efficient in their execution of high-level concepts.

The most consequential aspect of levelups is that this mechanic implements concepts of a psychological construct known as a Skinner Box.  Levelups produce a habit due to an irregular reward schedule for actions that the mechanic is keyed to give XP for.  Presenting the player with XP information 'weakens' the Skinner box, but interestingly does not remove the effect from the construct.

Further, it's very rare in works for a player to be penalized XP for failing a challenge.  As a result, most implementations of levelup mechanics result in quick iterations that aren't repetitive.  If a task is failed, the mechanic requires you to take the player character and practice somewhere else, barring the effects of other mechanics.

Last note: Leveling Up is well-discussed on TVTropes as well!

Referee Information / Data Structure:

XP
XP to next level
Character level

Player Information / Feedback:

XP
XP to next level
Character level

Designer Information:

XPRate = Action XP / Action Time Investment
LvRate = XP To Next Lv / XP Rate

Conditions:

Victory: XP >= XP To Next Level
This mechanic has no common failure condition.

When Is This Mechanic Engaging?

1. It doesn't make sense for the player to be an 'instant expert' at something - The levelup mechanic simulates the character practicing that skill over the course of the work.
2. Player skill renders a work, or a section of a work, solvable in a trivial amount of time - be warned that it will require attention to game balance, as well as modification or addition of content, to increase the time to solve the game.  Levelups will only provide the player with a mechanical view and justification of this process unfolding.
3. You want to mechanically show the player character growing over the course of a work.

When Is This Mechanic Distracting?

1. The challenges of the work are explained as the player already being an expert - they have no need to practice them, as they know them.
2. Some high-level mechanic is a trivial action - trivial actions are presumably already mastered by the player character.
3. Too much time is spent 'grinding' - All uses of Levelups require the player finding and learning to find more efficient fonts of XP.  In playtesting, if players can't reach their levelup goals in a time that they find reasonable, it will lead to disengagement.
4. Similarly, the amount of time to gain a new level increases too sharply - The "Skinner Box" aspect of levelups works best when it eases the player into creating a habit; major changes in the numeric progression of the system can lead to serious disengagement.

Game References:

1. Dragon Warrior I is one of the prototypical JRPGs.  This game is built nearly entirely around grinding as the Dragon Warrior tries to save the continent of Alefgard from the Dragonlord, bent on conquering it.  The character is practicing fighting in general.  That being said, one of the primary complaints of the game is that it is "too grind-ey", particularly at late levels when the Dragon Warrior has conquered most challenges of the game.
2. Dissidia: Final Fantasy is a fighting game that uses levelup mechanics to impose a skill cap.  For instance, if you're great with one character, but are a low level, you will lack access to certain moves.  Additionally because of the stat-dependence of the game, your attacks will deal less damage, and your defenses less effective.  That being said, an extreme skill disparity can still result in a low-level character beating a significantly higher one, as the level/stat mechanics don't fully negate the role of player skill.
3. The Elder Scrolls V: Skyrim features levelups for high-level skills like schools of magic, speech, and sneaking, but does not present XP information; you merely get rewarded for practicing a skill.  "Skill-ups" are frequent at first, but get infrequent quite quickly; the game tries to mitigate this by including skill trainers that you can speak with to purchase instant skill-ups with in-game currency.
4. Planetside 2 features levelups under different names for your character.  Levelups don't affect your play ability in this case; PS2 is a MMOFPS that is nearly entirely-skill driven.  Rewards are often in-game currency that can be used to buy upgrades.  This is a great example of using Levelups to cultivate a habit, in this case of playing a character.
5. WarCraft III has Hero Units that can be 'built' at a special building for each faction.  These are powerful units with powerful abilities, but to be effective they need to be involved in combat.  This serves to shift the metagame away from the standard 'RTS' vision of having more, stronger units than the opponent, to instead prioritizing training heroes and having a unit composition that complements the hero's abilities and weaknesses.