Experience

Experience points were added to Minecraft during the first part of the Adventure Update. They were originally revealed by Jeb during an interview. Experience can be obtained by gathering Experience Orbs from defeated mobs and players. Gathering experience points increases the player's levels by gradually filling a bar on the bottom of the screen until a new level is achieved when the bar is full. Each level up will reward the player with Skill Points, which Notch has said may be used for buying things such as increased jump height and increased maximum health.

Jeb_ has stated on Twitter that experience orbs will not drop unless the creature is killed by a player, rendering grinders useless for farming experience.

Jeb recently released a picture of the 1.8 GUI list, which shows the experience bar, among other things.

As of 1.8 there is no measurable benefit to gaining experience orbs and levels. The ability to spend Skill Points will be added in 1.9.

As of yet, it does not show how many skill points a player has.

Bugs

 * When the player dies, they drop all of their experience orbs individually. This creates a problem with retrieval of drops if the player has accumulated a large sum of experience, due to the extremely large amount of orb items created at the specific point. On SMP servers, this can be enough to even crash a server.
 * Another one is for the 1.9 pre release update where when the player jumps, they would gain a big fraction of exp.