I actually think the way BF2142 did its "level" system is quite good. I guess they are not exactly levels, but ranks anyway. Each rank in the begining results in a new title (fair enough) and an unlock. As you unlock more from a spesific kit, more items for that kit will become available. This is one of the few games with a leveling system like this that also allows the entirely new players to play the game very nearly as effective as players that has been there for a while, but still makes unlocking new tools to make yourself more effective or adapt new tactics possible.
They don't have any awesome "ding" sound when you level up, and it's simply and FPS game with a rank system and some unlocks, but IMO it works. Many MMOs and RPGs I think take too many levels and spread them too thin. Meaning, in the begining you'll be able to level OK, but after a while you find yourself grinding for days to get just one level. Often these levels won't even reward you with new gear or skills, just more "go there, kill that" jobs to get yet another boring level.
I have to be honest, I enjoy how the leveling in Oblivion works. You get better at swinging a sword by (simply) swinging a sword! True, you might not get all the skills in the begining, when you are called upon to make those desicions, but picking the blade skill and not the blunt skill won't render you unable to get better at wielding blunt weapons! You will need to do a little more training to get up to the same level, but its possible. A huge amount of RPGs won't let you do that! Then again, Oblivion and Fallout3 are two of the few games with a leveling system that will allow you to wield any gear and weapon at any time, you'll just suck at it until you level up in that skill.
For me a great anoyance is games that offers a geat amount of gear, but it's impossible to find a matching set! For example in WoW, you'll look like some raggedy retard until you finaly hit 80 and can get some awesome permanent gear, and still then it won't be very unique cause everyone else at your level is wearing the same damn thing! I wan't me to look cool! I'm in the game to be who I am in my dream, and I'm wearing very cool armor!
Worst thing a game can do tho is having the enemy level up the same as you are... I played a game with my brother back in the day, 4x4 evolution. A car-game. Anyway, you would spend and eternity earning money to buy engine upgrades, new wheels and a cowcatcher, and the very next race all the oponents have exactly the same upgrades! GAH! Even the same car's if you just bought the best one! STUPID!
I've got to stop this here.. :S