Level
A level is an abstract term of power in a role playing game. You gain levels most commonly through experience points which are accumulated through events and defeating foes. In general the higher of a level you have the more things you can defeat and accomplish.
Level up
When you gain a specified number of experience points you level up. This is a phase of game play where stats may increase or you gain access to new abilities. In some systems you may gain access to new equipment that was previously unusable to you.