I don't mind increasing competence in some individual skill being tracked with a "level" number for that skill. But in general, I think numeric "character levels" are a weird abstraction we can do without.
A modern RPG (whether tabletop, CRPG, or MMORPG) should IMO avoid this strange concept that by accumulating some arbitrary number of magic beans, you-the-character suddenly gain one or more new abilities... just like everybody else that gathers the exact same number of magic beans. That's just bizarre.
Ranks are OK, though, as long as they're not just character levels by another name.
Character levels will probably wind up somehow in Star Trek Online. ("It has to look like a MMORPG or gamers won't play it" seems to be the prevailing theory among game designers.) Perpetual Entertainment's version of ST:O, for example, showed sectors on their Sector Map as explicitly designed around character levels.
Another possible design for gating content (as I've mentioned in earlier posts on this subject) is based on ranks plus a magic level number within a department. For example, Player A could be a Level 12 Engineering Lieutenant, while Player B is a Level 48 Tactical Captain.
I like that a lot less than skill levels. It's just moving the character level abstraction down to a department scope. Still, even if rank + department is just two character level systems stuck together, it's better than just a single character level.
But not much so, because the more a game's design is wrapped around character advancement, the more mindless grinding behavior is promoted. ("Just 48,320 more magic beans -- I mean, experience points -- and I'll be a level 29! Now, where are the 160 Klingons I need to kill?")
I hope that Star Trek Online will be designed less about such grinding to gain levels and more about experiencing interesting Star Trek content, but we'll see. Ranks plus department levels might work out better than I'm imagining. If nothing else, it would be far better than if every character has one overall level number. /shudder