New characters are considered to be "young" and have had very little experience in the world. By vanquishing monsters and completing quests, your character grows (meaning, gains experience).
As you kill monsters and complete tasks and quests, you may be awarded a certain amount of experience (some quests will only include an item reward, though most include either an XP award, or both). The experience is reflected in the two blue bars in the target panel. The topmost of the two bars is segmented into 10 bubbles. Each bubble represents 10% of your total experience for that level. When all 10 bubbles (100%) fill up, you will gain a level, and the bar will clear and begin again. When the non-segmented blue bar fills, you will fill one bubble.
With each level, your character will gain more health and power. You will also gain points in your primary, secondary and tertiary attributes, and you will be awarded specialization points (based on your character class). These skill points are used to specialize in the various skills your character has available to it. You may also receive new abilities when you level, such as the ability to wear a different type of armor, evade, or parry.
Each time you level, you will get less experience from the monsters you fought the previous level. They will be easier to kill, but will be worth less, relative to your current level. If a monster cons gray to you, you will gain no experience from it at all. The ideal monster is going to be blue or possibly yellow, depending on your equipment and skills, and it's weaknesses and behavior. The game is designed so that the lower levels go by fairly quickly; but after that your progress may slow down, so that the higher you go, the longer it takes to reach the next level. Just as someone new to a skill absorbs a lot of new information very quickly, someone with a great deal of experience has less to learn. You will also notice that for some classes you can level very quickly in an effective group, since you'll be able to fight much tougher enemies then you could while solo.
Beginning at level 40, you will receive one half of your normal specialization points when you reach the half-way mark in the level (5 bubbles). This is intended to foster a feeling of advancement through the hardest levels of the game, where levels can be quite slow.
The maximum level in Dark Age of Camelot is level 50. While you can still gain experience beyond level 50, it has no effect on your character.