Experience Points

Experience points (also exp, rep or XP) are the primary reward for undertaking adventures in Borderlands. Every character starts with 0 experience points and level 1. Completing missions and killing hostile creatures results in experience points awarded to all of the characters present in the group. Completing achievements or challenges will increase the experience point total of the character for whom the achievement or challenge was completed.

Once the experience is gained your character will increase his/her level upon reaching a certain threshold.

Levels
The maximum level cap for all character is currently 50. However upon purchasing/obtaining the new DLC, The Secret Armory of General Knoxx, the maximum level cap increases to 61.
 * For each level gained your character will receive 15 extra health points added to the 100 base, which means the health calculation is: 100+(level-1)*15.
 * Also, every level acquired rewards your character with 1 skill point starting from level 5, meaning a total of 46 skill points at level 50, and 57 at level 61. You can also acquire two free skill points from Mad Moxxi's Underdome Riot, meaning you have a total of 59 Skill Points to spend.
 * Other characteristics like melee damage or resistance also increase at higher levels.