Leveling up is an essential part of Happy Pet Story, as when you level up, you are able to unlock more features and are rewarded with gems and coins. Some features that are unlocked with leveling include, plots for planting, Magic Mirrors to save your outfits, new types of Quests, and Town upgrades requested by the Mayor.
Tips on How to Level Up:
Blue birds will appear in your town, starting from Level 35 (I think). Whenever one of the flying birds poops on you or one of your Townies, you gain some EXP.
Doing any quest will reward you with EXP. This is the best way to gain EXP and level up, as there is always an abundance of quests to be done. Also note that as you level up, better quests will eventually start to appear.
Visiting another Townie and sending them a message will also grant you a small amount of EXP.
You can also grow EXP plants in your plots. They cost 100 gold and grow in ten minutes. Depending on your level they may each give you a small amount of EXP