shilsen said:
Keith Baker, in discussing his concept of PCs and the role of XP on the WotC Eberron boards, said that he simply views PCs as special in a way most NPCs are not. They accrue XP, go up in levels, and gain power in a way that most NPCs don't. Works for me. Call it a will to power, being chosen by the gods, etc.
Indeed. I don't see why NPCs and PCs should play by the same rules - because the rules are designed
for PCs. Why should the village blacksmith magically become a better
blacksmith because he happens to hit a few goblins on the head with his hammer? He should become a better blacksmith by pushing himself to become better at his trade - studying new techniques, creating more difficult objects - or never advance at all. One of my favorite points in
Knights of the Old Republic 2 is when another character basically says "You don't think EVERYONE becomes incredibly powerful by killing people, do you?"
A classic example to me is the Rohirrim in
Lord of the Rings. These are soldiers who have spent their entire lives hunting orcs. There is no particular reason that Eomer or Aragorn should be better that the thousand Rohirrim at their backs. But they
are, because they are the heroes. They have a potential that the others - the NPCs - do not, and that's what makes the Fellowship stand out even when surrounded by a vast host of veteran soldiers. The ability to advance using the standard XP system is one of the things that brands PCs as heroes in the world. In Eberron we encourage DMS to pick NPCs to advance along with the PCs, but the idea is that these are the "heroes of the opposition" - NPCs with the same limitless potential as the PCs.
Anyhow, in short, my approach is that people have a certain potential. Not everyone who studies music will become Mozart, and killing goblins certainly won't help them. For most people, that potential is 1st-2nd level; don't forget, by the DMG demographics table, 98% of the population is 1st level. A few people rise above that, either due to innate potential or because they strive to challenge themselves and overcome these limitations - as suggested, the will to power. And then there are characters like the PCs, who have limitless potential... and who will therefore be the heroes of the age.
One last note: Eberron also has a few high-level NPCs, like the 16th-level lich who's been around for thousands of years. Thousands of years? If killing things was going to bump her up a level, I think it already would have. At the same time, once the players are reaching 16th level, she needs to improve in order to challenge them. In these cases, I like to justify the improvement with major events as opposed to traditional XP. Apparently, sixteenth level is her plateau. But perhaps she can overcome that by acquiring a powerful artifact, an ancient tome of necromantic knowledge, the blessing of a dark god, or the like. The PCs stop Vol from destroying Sharn, but she manages to escape with the
Syrkarn Codex - and after researching this tome, the PCs realize that Vol will be more powerful the next time their paths cross. Basically, I want it to feel like a story: there's a reason the archvillains have suddenly become more powerful, when they've been complacent for so long.
Almost any other way of getting XP (other than perhaps doing it as goal-oriented XP, where you get XP based on completion of story elements or plot points) is risk-free. If that were more prevalent, people would always choose the more risk-free path and painlessly level their characters. You and your group might not, but I believe the majority of players would. 
