What game(s) had the best, or your favourite, leveling system?

I mostly play MMOs.

Runescape
Specifically, I mostly played what's now considered the "old school" version. The process of leveling was ... tedious, but that's really what the game is known for. Every few levels (usually on the intervals of 5s or 10s), the player would get access to the next "thing" - the next ore, the next fish, the next weapon material. This "next thing" would usually be an improvement on the last "thing," and it'd allow them to do whatever they're doing faster/better/elsewhere, which was good, because the next level would require a lot more experience to reach. For how tedious the leveling is, it was very engaging.

Lord of the Rings Online
Back when I started in the Moria expansion in 2009, leveling was really rewarding: players got a new ability every or every-other even level, and a passive every few odd levels. Every 10 levels, the player got 1 or 2 class-defining abilities. There was nearly always something interesting to look forward to. At the time in the game, players had to physically go to class trainers in sufficiently-large towns to purchase their new skills, which meant that the players were often traveling back to the nearest settlement, something I considered a positive thing as it meant seeing other players idling around, giving the game a populated feeling.

In later expansions, leveling was less rewarding as passives weren't given and abilities were given less frequently or were just upgraded versions of older abilities. Worse still, in one of the expansions (I don't remember which), a few abilities were actually removed from players at the pre-expansion level cap and players were required to level into the new content to get those abilities back.

Guild Wars 2
I leveled one of each class (sometimes just with crafting though) before the Heart of Thorns expansion, so I (thankfully) didn't experience the "revamped new player experience" that they introduced to general unhappiness a while back. Leveling is much different than LotRO: the player's primary weapon abilities were granted quickly and were based off of the player using that weapon, not their level. The "right side" abilities were based off of level (I think, it's been a while). With zone level syncing, leveling was largely just a gate to show the player were to go to experience the world. Additionally, unlike many quest-based progression games, getting experience in GW2 is much more so done via exploration and interaction with the world. For me, that was really hard to get used to (coming from 5+ years of LotRO), but once I did, I felt like it was a much more relaxed but similarly engaging progression system.

EVE
I played before the introduction of skill injectors. Leveling was interesting in that it happened passively. A player that was logged in 24/7 and one that logged in for 5 minutes every few days would "train" at (nearly) the same rate. Players could "remap" their attributes (think D&D, i.e. Charisma, Willpower, etc.) to train certain skills faster. This led to players planning out their training months and sometimes years in advance though EVE's wealth of incredible third-party tools. You could see how long someone had been playing the game by how many skillpoints their character had.

What the skills granted were anywhere from access to a new ship, a new style of weaponry, or 1% of some attribute, so it really depended on what you were training. As this progression mechanic was largely hands-off, I wouldn't say it was engaging, but it sure was great to log in and get a notification that some skill that you'd been training for 28 days (seriously) was finally finished and you could fly that new ship you'd been waiting to get for 3 months.

Edit: FFXIV
Leveling is an absolute chore as soon as the player knows what it's like to be at end game. The very slow GCD turns many people off from the game as soon as they participate in their first fight. For players going back and doing lower-level content after experiencing what characters are like at end game, it's a huge turn-off. Abilities are spaced pretty far away from each other, so players can go a number of levels without getting anything that really makes them feel like they're getting stronger.

Bonus round: Metroidvanias

Ori and the Blind Forest
Leveling in Ori was done in a predictable manner: killing monsters and finding xp orbs both progressed the player forward to the next level. Leveling granted points which were spent on skills, which are arranged in 3 branches, where unlocking something required getting everything prior to it in that branch. Most skills early on cost only 1 point, but some later on cost 3 points. There were (guessing) 15 of these skills, nearly all of which were interesting. Leveling meant that the player could get (or was closer to getting) one of these new skills which usually meant a change to gameplay, whether they was killing enemies faster, jumping farther, or seeing previously-hidden markers on the map. Whenever I hit a new level, I'd get to the skill selection screen as fast as I could (which was another mechanic) to see what I could pick up next.

Hollow Knight
A game without a typical XP system. "Leveling" was done solely through exploration and boss fights. As far as engaging goes, it definitely is: you really have to work for everything. Movement abilities are gained through killing bosses, a mandatory advancement and really sort of "chapters" of the game. Health and "power" are gained sometimes through killing bosses, but also through exploration and interacting with the game's cast of characters.

I really enjoyed the skill levelingin the very early days of Flyff. (its apparently a p2w wasteland nowadays)
Skills were leveled by using them. So the more often you cast heal, the more it levels up. There was a skill bar that filled up like an experience bar to keep you from idling too much if I remember right. People used to stand afk and heal themselves to buff the skill. It just felt like you were honing the skill by using it. I haven't seen any other game do that

I liked Final Fantasy V quite well; The ability to level various classes independently to customize your team was great, and the fact that certain milestone levels gave that character permanent bonuses regardless of what class they were at the moment made for interesting long term planning without requiring FFX or Path of Exile levels of planning ahead for a 30 item path.

A couple of things come to mind,

Pokemon (Red/Blue, Gold/Silver, etc) - Leveling up Pokemon was always tons of fun. You level up Pokemon by gaining EXP from battles. Each Pokemon has a preset list of moves they can learn at particular levels and there are certain moves you can teach. Nearly all Pokemon "evolve" into different Pokemon at certain levels, which basically gives a stat bump and a new look to the Pokemon.

I do think the Pokemon leveling system is a bit too simplistic to stand on its own. Rather, it's the sheer variety of Pokemon that transforms leveling up Pokemon into a process of discovery - discovering which moves a Pokemon will learn (because it's not obvious without prior knowledge) and obtaining the evolved forms was a lot of fun.

There are many other good "quirks" to keep it interesting and rewarding, too, like how un-evolved Pokemon learn moves faster (at lower levels), or how traded Pokemon gain experience faster, or how certain moves enable progression through the world (e.g. learning surf lets you traverse water to access islands), or how moves can be passed on through breeding, and so on.

Zelda (similar to another's comment about Hollow Knight), Zelda is not an RPG. Link does not have stats (just HP and Magic) or skills. Rather, as you progress through the world, Link obtains new items that enable him to do new things and progress to new areas. In The Ocarina of Time, you learn songs to cycle day/night, to make it rain, to call your horse, to warp you places, and so forth. You find scales that let you dive deeper under water. You get new tunics the protect you against fire, or let you breath under water. You get new boots, shields, bombs, arrows, and other items to help you accomplish certain tasks.

One of the great things about the progression in Zelda is that I figure out how to use all the items. I don't just grind exp/levels in the same way the whole game. As a player, I'm challenged to figure out what to do with the items I collect (sometimes it's obvious, sometimes not) to solve dungeons, and I improve as I play, not just my character. That makes it a lot of fun to me while not being overly difficult like skill-based "games of mastery" (e.g. hard platformers or rhythm games in which you mostly just focus on mastering controls).

Not a video game, but I like how GURPS does it. When you're building your character you have some specific amount of points based on the intended power level of the campaign (25-50 for normal people, 100-200 for peak human, 250+ for supers or god campaigns). You use these points for everything in your character build, stats, skills, wealth, allies, etc.

At the end of each session, the GM awards some number of points depending on perceived progress, and desired speed of advancement, usually between 1 and 5, and the players allocate them into whatever area they want. Super open ended and granular.

I have fond memories of Final Fantasy Tactics leveling system.

The jobs system and the ability to combine skills from different jobs are great.

For me the latest versions of Diablo 2 was a local optimum for hack & slash games. Attributes like Strength, Dexterity, etc. were meaningful and could make a build totally different (like maximizing Strength, ignoring Vitality for a life leecher versus the reverse). They addressed the uselesness of earlier skills in a tree by making them have an influence on later skills, so maximizing an earlier skills wasn't wasted because a later skill would get stronger by it. This way you also did not need to save up on skill points while levelling.

Dark Souls.

About 15-20 years ago I was really into a multiplayer text-based RPG called DragonRealms which has one of the more complex experience systems I'm aware of. I still miss it from time to time for its flexibility in making your character what you want them to be. It's a little similar to Asheron's Call (which I also liked) but wasn't based on skills alone.

Characters had classes (e.g. Paladin, Barbarian, Thief, Cleric), ability stats (e.g. strength, intelligence, wisdom), and then skills.

Skills range from a variety of weapon types like light and heavy crossbows (two separate skills), edged weapons split by weight category (light/medium/heavy/two-handed), to survival skills like swimming, foraging, first aid, and stealth, to lore skills including teaching, alchemy, and music, to set of magic skills like how much mana you have access to when casting a spell, how powerful your spell is, and how well you can aim at a target with an attack spell. You'll need a minimum number of ranks in a weapon skill to hit a specific kind of monster, or you can't shoplift an item worth a certain amount without so many ranks in thievery.

Using a skill improved it, but in an indirect way. Each skill has a separate "pool" that gets filled up by a certain amount when do you something that uses the skill, or periodically while another player in the area is teaching you that skill. Then every minute or so the pool drains by a certain amount and that gets converted into skill ranks. The pool also has a maximum size, so trying to train the skill when your pool is already full doesn't have any effect. The intelligence stat increases how large your pool is, while wisdom increases how much it drains at a time.

Making skill training work that way has an indirect effect of making it viable to go out of a city, fill up the experience pools for a bunch of combat skills, then come back to the city to socialize and train non-combat skills while the pools for combat skills drain. You aren't missing out on combat experience once your pools for those are completely filled.

While there are certain skills that are restricted to specific classes (e.g. backstabbing is a thief-only skill) and each class is better or worse at training sets of skills, the majority of skills can be learned by any class which leads to a huge variance from one character to another. One mage can wield a two-handed axe and wear plate armor while another might wear leather armor and rely on no weapons but their magic. A thief could be good at playing stringed instruments and a cleric could be good at stealing.

Gaining levels in a class in turn relies on gaining a specific number of ranks in certain skills, or certain sets of skills. A thief might have to have 60 total ranks of stealth, 60 in thievery, and 30 ranks each in two different weapons of any kind to get to their next thief level. Both gaining class levels and ranks in skills provide a way to increase their stats, though, so a well-rounded character will likely be training a wider variety of skills than they're required for gaining levels alone.

More info on experience and skills on the game's wiki, which is still running more than 20 years after it started.

I really like Skyrim's leveling system but I think it would make more sense if skill perk points were awarded when the skill leveled up and then perks had more levels, instead of getting one point per player level