Sorry, I just got a little turned around a little too late!
You get xp towards you Sword using Skills (Stay with me here) when you use your sword. Got it. Thats how you level up.

BUT, the miniquests, such as The Letter of Sven (preview article stated this somewhere). You didn't fight anyone/anything. It was just a messenger quest. Why do those "Peaceful" quests, when you won't level up at all?! I just ask, because I figured Quests don't reward you with XP.

quest rewards and having fun

For the story.

Armor, weapon, gold?

Okay...see, I wasn't thinking. Thanks.

Quest Rewards, possible companions, story and RP purposes...

Why shoot people in FPS games? You just waste ammo!

The objective of all interactions is not the loot or levelup.

Look, this isn′t fable or WOW this is TheElderScrolls. in real life you also don′t get experience in swords by helping a granny cross a street.

Sorry, Just single minded at the moment. All I really wanted was to level up, didn't think about the story or small loot.