in oblivion gaining a level didn't feel like much of an accomplishment. you got points to add to base statistics but you were still going back to grind out those levels in athletics that you needed or in restoration. it feels like an excess of game play for what i was trying to accomplish.
To me ugrading your skills at the level up makes the level up a bit more meaningful. In oblivion what level i was didn't seem to matter as much as how high my marksman or security skill was. I guess i like the instant gratification of a level that gives me a substantial boost to my abilities than a level that is merely the culmination of things i am supposed to be doing anyway.
Oblivion's level system was easily abused if you were a patient person. you could set skills that you really wanted as minor skills that don't go towards leveling. Then grind out those abilities to the nth degree and have amazing abilities at really low levels. Fallout's leveling system helps keep things more balanced throughout the game (speaking purely of the leveling system not of all the other factors that go into improving skills)