To advance to a higher level, you have to collect a certain number of experience points. How many points you have to collect for your next level is determined by the following categories: race, class, and attributes. Generally, you need more experience points to advance if you are very good in one or more of these categories, you need less experience points to advance if you are below average in one or more of those categories.
Whenever you have earned a certain amount of experience points, you increase in level. Increasing in levels is a very good thing to do because this brings many benefits. Whenever you go up a level, you get better in combat, receive more hit points and more magical power (depending on your class and race). You are also allowed to increase your skill values. The number of skill improvements depends on your learning score. Finally, you get a chance to raise (or lower) your attributes. This decision is made by the game and is heavily influenced by your class, your experience level and your actions during game play. There are finite limits to the number of times you might be able to increase attribute scores in this way. Once you have reached your natural potential, no more training of whatever kind will help to increase attributes. Only magical means will further enhance your attribute scores.