Defeating enemies, at least ones that aren't carrying items, rewards you with experience and so-called license points (LP). Experience is used just as it is in any other RPG. Your character rises in level when crossing a certain experience threshold and gains added HP, MP and strength.
The LP is used for one of FFXII's coolest new gameplay systems: licenses. In FFXII, as with most other RPGs, you have to buy or find weapons, magic spells, skills and armor. Here, though, a character can only equip weapons and armor and use skills and spells if he's acquired the appropriate license.
Each character has a personal license board, which looks somewhat like an irregular chess board. Each square on the board corresponds to a single license for a particular set of skills or items. The board is split into six license regions: magic, skills, accessories, defense, options and weapons.
As an example, in the magic area, you'll find one square, titled "White Magic Lv. 1," which allows the character to use a level 1 cure spell. Another square, titled "Black Magic Lv. 3" lets the character use level 3 fire, blizzard and thunder spells. In the case of accessories, defense and weapon slots, opening up a given license allows the character to equip certain classes of equipment. You can make a character equip bows, daggers or heavy armor, but only once you've acquired the appropriate license, even if you have the equipment in your possession.
Two special skill types appear on the license board as you advance through the game: Summons and Mist Knack. Mist Knacks are character specific special moves, presumably like the limit breaks of previous FF games (I haven't gotten my hands on one yet). As for summons, each summon beasts can be assigned exclusively to a single character; once assigned, the summon cannot be acquired from the license board of another character. Both of these skills, once they've been acquired, are selectable via a special command on the battle menu.
Your character starts off with just a couple of slots opened up on the license board. Aside from these, the board reports to you the effect of opening up adjacent slots, but keeps the rest of the board a secret. You open up new slots using your hard-earned LP, adding new potential power to your characters. You're free to open up the slots adjacent to ones that have already been opened. As you move away from the initial slots, the corresponding skills become more powerful, but the LP costs rise.
Even if you get a license to use a piece of equipment or a spell, you can't actually use it until you've purchased the equipment or spell in town. In the case of weapons, each character has to have his own copy of the item; these are then equipped as in any standard RPG. For spells, you need only acquire the spell once, then everyone who acquires the license can use it.
This requirement that you have both a physical copy of an item and a license to use it offers a fresh approach to character development. It's possible that you'll get a powerful weapon early on, but you won't have a character capable of using it. Or, perhaps you'll get a license for a powerful spell, but the only thing keeping you from using it is actually finding a store that sells it.