Players can currently reach up to level 30 in Rec Room, assuming they have registered with an e-mail address. Unregistered players cannot level up beyond 3.
You can earn experience towards the next level by playing games and completing Challenges. Your progress towards the next level is visualized by the closing line around the level number in the Profile Menu.
Higher levels unlock more of the Cosmetic Items.
Rec Royale has its own leveling system (called "tiers").