Don't remember where I wrote about it, but the concept is simple, and goes to the very heart of the game and player psychology. Levels serve not only a measure of power (which is very handy) but much more importantly they're a carrot on a stick to keep players playing. You can always look ahead and see what cool new power/spell/feat/skill/ability/hit point bonus/saving throw increase/etc. you're going to get, but you'll only get them if you keep playing the game. In other words, your character gets better as a reward for you playing the game and so you keep playing. It's the opposite of a game like Monopoly, where when you succeed in the game the game rewards you by letting you win (and thus ending the game, stopping you from continuing to play). It's so brilliant that virtually ever rpg (pen and paper or computer) uses something like it. It turns the game into a self-perpetuating meme, after a fashion.
This is true regardless of edition, which I'm sure was the context in which I said it originally. If memory serves, I wrote an article about the two most ingenius things of D&D being the two most maligned: classes and levels. If Gary hadn't put both of those things into OD&D, I don't think we'd all still be here chatting about rpgs.