Experience points (XP) measure how much your character has learned and how much he or she has grown in personal power. Your character earns XP by defeating monsters and other opponents. The DM assigns XP to the characters at the end of each adventure based on what they have accomplished. Characters accumulate XP from one adventure to another. When a character earns enough XP, he or she attains a new character level (see Table 3–2: Experience and Level-Dependent Benefits, page 22).
Advancing a Level: When your character’s XP total reaches at least the minimum XP needed for a new character level (see Table 3–2), he or she “goes up a level.” For example, when Tordek obtains 1,000 or more XP, he becomes a 2nd-level character. As soon as he accumulates a total of 3,000 XP or higher (2,000 more than he had when he gained 2nd level), he reaches 3rd level. Going up a level provides the character with several immediate benefits (see below).
A character can advance only one level at a time. If, for some extraordinary reason, a character’s XP reward from a single adventure would be enough to advance two or more levels at once, he or she instead advances one level and gains just enough XP to be 1 XP short of the next level. Any excess experience points are not retained. For example, if Tordek has 5,000 XP (1,000 points short of 4th level) and gains 6,000 more, he would normally be at 11,000 XP—enough for 5th level. Instead he attains 4th level, and his XP total stands at 9,999.
I think it's in one of the Rules of the Game articles that this is generalised to include deferring level-up for purposes of item creation, and it's clarified that you can effectively do so indefinitely. I'll try and find a quote later.SRD said:XP Cost (XP)
Some powerful spells entail an experience point cost to you. No spell can restore the XP lost in this manner. You cannot spend so much XP that you lose a level, so you cannot cast the spell unless you have enough XP to spare. However, you may, on gaining enough XP to attain a new level, use those XP for casting a spell rather than keeping them and advancing a level. The XP are treated just like a material component—expended when you cast the spell, whether or not the casting succeeds.
Musrum said:Is there anything in the rules that allows you to defer the level up?
For example: my character has enough XP to take Assassin, but has not yet "done the deed". Does he have to take a level of another class and try again next level?

(Dungeons & Dragons)
Rulebook featuring "high magic" options, including a host of new spells.