I believe it means that NPC's will earn levels similar to players. You will be able to add points to their skills to make them more useful workers, guards, greeters, or whatever it is you use them for.
As I understand it all NPC's are created at experience level 1 and either class skill level 1, 2 or 3.
Experience level and class skill level being different. The higher the class skill level the higher their starting skills, experience level gives less skill points then the difference between each of the class skill levels after all.
1. NPC's will be able to gain experience and levels, however I don't believe they can currently do so.
2. See one, presumably by travelling on foot and doing whatever there job is. I.e shooting things for troops
Now read my post above and then read the rest of this post:
3. NPC's are spawned at experience level one, see one.
4. For each NPC type, there are 3 different class levels that are available, with level 1 being the lowest and level 3 being the highest. There is a 60% chance that the NPC will be of level 1, 30% chance of level 2, and only 10% chance of level 3.
This is only my opinion after reading the rules page however so I could be wrong, however as it says "there are 3 different >class< levels", I'm pretty sure I'm right.