Unless I'm mistaken, when you level up, all enemies also increase in strenght and health to provide balance. So it seems the only thing that makes a difference is what skills you have, not necessarily your experience level. The reason I ask this is because I like to be several levels higher than normal before entering a new area, but now I'm wondering if it even matters. Thanks.

Yes, well sort of, the world levelling is actually a lot more complex than that. There are some challenging unleveled enemies you encounter even at low levels. As you level, you will encounter more difficult enemies but you will still encounter many of the same enemies like wolves and ordinary bandits and such.

Honestly though, you are better off not worrying about such things and just enjoy playing the game. If you happen to run into something too tough for you, just run away and come back later. Eventually your character will become so overpowered that very few enemies will provide much challenge.

It's worthy to remember that not all enemies get tougher as player levels up. The scale of challenge just gets wider, some enemies get tougher but there will still be those which die merely by staring at them. And a lot of between.

So just play and try not to worry.