I haven't played it (Skyrim is my first TES), but I'm definitely about to get the GOTY edition.

Oh well, in Oblivion, they had this system where everything would level up with you. This had 2 problems. 1. Enemies never got tougher, only bigger as you level up, as a result, you never feel any more powerful than a level one. 2. One you hit a certain level, all the equipment changes immediatly. For example, once you hit level 8, caves, bandits, shopkeepers suddenly have an abundence of dwarven armour.