Does Morrowind have levels or just level the individual skills?

Does Morrowind have levels in the traditional RPG sense?

Or do you just level each individual skill?

In order to gain a level in Morrowind, you must improve your Major and Minor skills by a combined 10 levels. You can gain 1 level in each skill, or 10 levels in one skill, or any combination thereof.

Afterwards, you need to sleep (not just rest/wait, but sleep, either in a bed or in the wilderness), and you will be able to gain a level.

When gaining a level, bonuses will appear, up to +5, for your different attributes, depending on the skills you leveled up since your last level. This includes skills that are neither major nor minor skills. Therefore, increasing these other skills can be a good way to ensure you get a +5 in the stats most important to you. The bonus is defined by the attribute associated with the skill, so therefore, Luck will never get a modifier.

You pick 3 attributes to increase at levelup, so if you have bonuses on 4 or more attributes, extra bonuses will be lost.

It's also important to note that, if you gain more than 10 major/minor skills before you get a chance to sleep, the extras will carry over towards counting for your next level. You will only gain one level for each time you sleep, so if you've gained 20 or more skills, you'll need to sleep at least twice to gain all your levels.

Any attribute bonuses you've accrued go away as soon as you've gained a level, so it's generally preferable to level as soon as you get the 10th skill, or else you're liable to waste attribute bonuses you could have used otherwise.

Morrowind does in fact have levels, which is obtained when you gain enough skill levels in your primary and secondary skill categories.

Each time you level, you get to choose 3 attributes to improve (with multipliers depending on which skills you advanced during that level)

Gaining levels will affect how much health you gain (based on your endurance), and improve enemy quality as well as loot.

As a related answer: it quickly becomes clear that if you train related skills at a good rate, and then level up, that you get MUCH higher stat bonuses (for example, if you level maces up +10, then you'll be able to increase strength +5, if you level maces +10 and restoration +10, strength +5 & will +5, etc). It's also true that if you put one of the skills you use most as one of your "level" related skills, you're going to level very inefficiently (for example, if your level skills are swords and heavy armor, and you level after +5 swords and +5 heavy armor, you're going to get +2 str, +2 stam, and +1 something else...The same point total you'd get for one stat, if you'd worked your skills more efficiently).

The best thing to do is to base your class around skills that you don't use heavily, that build different stats, and that you can still easily level. Then you can choose when to level, and have time to build up the related skills, so you can get better stat levels.