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Your character advances in power by gaining experience. Humans need 1000 experience points for each level of experience. Other races need some percentage of 1000 exp for each level, from 666 to 20000 exp points.

You gain experience by:

killing a mob
being part of a group that kills a mob
healing other players (under certain circumstances, as a Priest)

You lose experience by:

fleeing from combat
recalling out of combat
being the target of certain spells

The experience you get from a kill depends on several things: how many players are in your group; your level versus the level of the monster; how many of this monster have been killed lately; and some random variation.

See also TNL, Tiers and Sublevel.