Of course you can question level, like you can question all kinds of other popular gaming concepts, like for example hitpoints. But there is always a reason why these concepts are popular, and level is exceptionally important and hard to do without.
The point of leveling is that you have a measurement of the power of the character. This is necessary so you can always have a challenge, and keep the challenge in the sweet spot where the game is not too easy and thus boring but also not too difficult and thus frustrating. So level is supposed to give an easy way to approximate the power of your character.
Games without leveling exists, like one of my favorite games ever, Vampire: The Masquerade: Bloodlines (2004) by Troika Games (R.I.P.). But here we follow a very strict game in regards of control over where you can go when. Also, the improvements that you could have for your character have been strictly regulated as well.
Even so when I started playing VtMB, I made many errors, and some combat became impossible. Not having level is tough.
Namely in VtMB you should not undervalue defense, as you can do in other games. Defense really is essential when you face large groups of opponents. High or low defense is then the difference between a manageable fight and an impossible one. This of course only happends on some vampire clans. A Ventrue or Gangrel can rely on Fortitude instead.
Another important rule in VtMB is that ranged starts of really weak, but becomes very strong later, so on a Nosferatu its a must to have, and other clans can definitely benefit as well.
In an open game world, its even less desireable to not have level. It basically means you cannot have progress at all.
It by the way also helps the player. If I can see the level of the opponent, I can know if I should avoid them for now.
And games that keep the level of your opponents the same as your own are really bad. They remove all meaning from level.
Worst offender in this category was The Elder Scrolls 4: Oblivion. Not only did your opponents strictly level with your character, but level didnt even represent a specific level of power. So you could easily make your character underpowered and end up with an unplayable game. Oblvion literally forced you into powergaming.
To a lesser degree many games do this. Which is fine. As long as you dont do this too severely. BG3 by the way also does this. If you create not one but two characters, you face four Imps with Laezel instead of the usual three.
