As a sandbox game there is no overarching narrative guiding progression in M&B, so “winning” falls to a player's own particular interests. This could mean aiding your faction in achieving dominance, but could also involve more character-specific goals.

Perhaps you wish to aid a pretender to wrest the throne from her rival and in turn be granted a lordship. Both your Renown (earned in battle) and your Relationship rating with lords and townspeople will determine if they even acknowledge you, and are impacted by quests and the decisions you make.

If combat is your main goal, the XP gained from kills and completing missions increases your stats, which in turn opens the door for higher skill levels. Skills are all passive, and range from dealing more damage with certain weapons to riding better horses, tracking other groups, capturing prisoners, persuading nobles and better training of troops.

Yes, your troops will also level up, following one of several upgrade trees. Those Swadian farmers you recruited might become powerful knights, while the Khergit recruits can become agile horse archers.