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As your heroes and squads partake in combat, they'll contribute experience to a large common pool. You can use this pool to level up individual heroes or a certain type of unit. Units of higher levels get higher attack modifiers and more hit dice overall. In a departure from the D&D formula, hitting is not determined by probability here; all attack modifiers merely cause the unit to inflict more damage. And though you'll have to pay to bring heroes back from the dead, they come back at whatever level they were at when they died.
Heroes can gain even more experience by finding caves and holes that give them access to the subterranean layer. Here they'll find the sunken city of the Elves and confront the terrors that drove the Umbragen out. Since only heroes can go down here, you'll find the underground portions of each map play more like Baldur's Gate or Dungeon Siege. (You can switch between the lower and upper layers by tapping the space bar and each layer has a mini-map on your HUD.)