You level up by increasing any combination of your major and minor skills 10 levels. Once you do, you will get a message saying you should rest and medititate. Once you rest, you choose which skills to increase.
Here's where it gets very interesting. When you level up, next to each attribute there will be a number from 1-5. It says how many points you will add to that attrribute and is based on how much you raised your skills that depend on that attribute. By training misc skills enough you can increase that number to 5 and get the max advancement. Here is a link to a page that explains it a hell of a lot better than I just did:
http://www.gamespot.com/gamespot/gam...rrowind/7.html
This is an excellent guide. It tells you almost everything about how the game works. The first 33 pages are devoted to helping you understand the game, since it's very complex. That section is pretty much spoiler free so you can use it pretty risk free. There is also a pretty basic walkthrough for just about every quest in the game.