From what I remember (it's been a while), you pick a bunch of key action skills (stuff like Two-Handed Weapons, Heavy Armor, Alchemy, Restoration Magic, etc.) and when you level them up enough, you get to properly level up your character. When you level up your character, you get to pick bonus points for your core skills (stuff like Stength, Intelligence, Luck, etc.)
The amount of points you can give your core skills on each level up is proportional to how many levels of associated actions skills you got before the level up. So, if you got a bunch of levels in Swords and Heavy Armor, you could get +5 to Strength instead of +1 or +2. Because of this, the optimal way to play the game is to level up as little as possible and to control when you level up to always get the biggest bonuses that you could. That's why all of your key action skills would be stuff that you could 100% control when you got points in them (like most non-combat magics, speechcraft, enchanting, etc.) and not stuff that you could accidentally level up by just playing the game normally (like skills tied to weapons and armor).
Also, the enemy scaling was ludicrously aggressive and directly tied to your character level, not any other stats. So if you didn't understand the system and leveled up too quickly, not only would you not get many bonus points for your core skills, all of the enemies would rocket up in power and make all the fights incredibly tough.
