Do PCs understand the nature of the leveling system and its experience requirements? For example, suppose a PC is just below the XP requirement for a level and is planning to undertake a major quest. Would it occur to the PC to consider undertaking a side quest to finish their next level attainment before taking on the major quest or do PCs perceive experience in a more real world, linear, continuous fashion?
As an analogy, one could consider "leveling up" in DnD to be analogous to real world standardized test score cutoff points, pay grades, military ranks, certification levels, athletic awards, martial arts belts, or academic degrees - practice math and reading long enough and one can get another 100 points on the SAT and qualify for admission to a slightly more prestigious college (or one could decide that it would be better to finish up their Second Degree Black Belt before entering that real world fighting contest), or one could consider XP to be an OOC abstraction of a fundamentally ineffable concept that PCs can barely understand, let alone quantify.
This question is not the same as How does a character know when she's leveled up? because that question is asking specifically about PC's recognizing that specific event when they have leveled up. This question is about whether PC's are aware of the concept of leveling up. It could be compared to the difference between a person recognizing that they have received an academic degree versus them understanding the concept of academic degrees and what one must generally accomplish to obtain them.