Ding! Now You Suck Less
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5. If done right, leveling can let players seek their own challenge level without needing to fuss with the difficulty slider. "Whew. These guys are really hard. Maybe I should level a bit before moving on." Or "Man, these guys are a cakewalk. I think I'll skip this dungeon and find something a little tougher and more rewarding."
How game designers muck this up: The biggest way to mess this up is with auto-leveling foes. Did you just ding level 7? Guess what? So did every single monster in the game world. Congratulations on gaining absolutely nothing! The other way designers mess this up is by applying hard level caps to areas of the game. Maybe you must be level 7 to enter the jungle. Maybe you can't go above level 7 until you leave the jungle.
Either that, or they add one-way doors to the game world so that you can't revisit old areas. It feels good to go back to the troll that gave you so much trouble at level 5 and give him his comeuppance when you hit level 10. When designers don't let you do this, you feel like you're running in place instead of climbing in power.
Either way, it puts leveling on rails and takes away your freedom to experience the game at your own pace and skill level.