Calm down dear...etc...
Basically oblivion uses a retarded levelling up system wherby it encourages players to abuse it. You will notice you have several "Major" skills and severa l"Minor" skills (you can find this in your journal) your major skills start at level 25, whereas your minor skills at level 1. Each action you do (such as jumping, melee with swords, magic etc) increases the corresponding skill. As the skill increases, your proficiency in it also increases, and you unlock a bonus ability every 25 levels.
So lets say I want to level up conjuration, every time I conjure a creature, it goes towards me levelling up in that skill, which in turn improves my conjuring ability.
Improving your major skills will allow you to level up when you sleep, improving your minor skills will not. Levelling up brings tougher enemies, better loot, more health and a couple of other bonuses.
The game takes off in a little while, after you get the hang of the inventory, and get some quests done. Like all RPG's, give it time and you will have a lot of fun with oblivion once you learn the nuances.
You paid for the shivering isles expansion. I reccomend you wait a bit beforegoing there, explore cyrodil first.
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