One of the major concerns I had before I started running my open game table is this: How should we handle character levels and experience?
My immediate inclination, and Justin Alexander's when I asked, was to start everybody off at level 1 (or whatever level you prefer to play at; I know 1 is too weak for many people). Each character gains experience at the usual rate for monsters they kill and RP they participate in. That's all you need to do, D&D's experience point system solves the problem for you.
I'd like to point out how much of a work of sublime genius the 3.5e experience system really is. A player is rewarded for each session he attends. Low-level characters gain experience faster than high-level characters, and so inevitably catch up. Low-level characters can usually contribute at least a little to a team of higher-level characters, at least until they catch up, which won't take long at all.
That's why, whenever somebody says they dispense altogether with 3.5e's rules for awarding experience, I want to bludgeon them upside the face and neck with some sort of large stick. If you just say "You all gain a level" every few sessions, or you just split the experience evenly with no regard to level, you save a few minutes punching numbers into a calculator every session, but you lose all the benefits of one of 3.5e's most well-implemented systems.
The open game table particularly lends itself to Alexander's last point in that comment, that the ideal method is to provide a variety of challenges, and allow the players to choose which one they want to tackle. If they discover that the centipedes in the cold iron mine are too weak for their taste, they can choose to head to the fungus-filled Stank Cave instead. This puts it entirely up to the players to decide their ideal level of risk and reward. This is very similar to Shamus Young's argument against auto-adjusting difficulty in video games.
On the other hand, as I commented in that comment thread, I’m a little afraid that might discourage players from keeping a stable of characters, if they have to bring each character up from zero.
How should I fix this - allow a player to, at any time, create a second character at 75% the experience of their highest-level character? This is distasteful to me, for a number of reasons. The biggest: it defeats part of the purpose of having a stable of characters in the first place: choice of what level you want to play at. "All the other characters in the party are level 1 today. Should I play my level 5, or pull out my disused level 1?" Level imbalances sort themselves out, sure, but there's a point where the difference can just be too great. So I'm going to say all characters start at level 1, and a player can, at any point, choose to create a new level 1 character, or to play one of the pre-gens I've provided.
Speaking of which: for players who don’t want to make their own characters or who don’t have time, I am indeed using a common stable of pre-gen characters that anybody can play, who level up just like any other character. If a player plays a pre-gen and likes it so much that they want to claim it permanently for themselves, they may do so by putting their name at the top of the paper. Conversely, if a player decides they're not super-fond of one of the characters in their stable, they can erase their name and allow anybody to play it.
I was almost afraid this might discourage people from making their own characters, but the ability to say “I brought pre-gens, you don’t need to make a character unless you want to” is an incredibly powerful tool in reducing the barriers to entry. It's worth it.