NO MORE ATTRIBUTES

Doing away with the attributes in Skyrim seems like a natural step to me, and not at all a symptom of dumbing-down the formula. Attributes already were connected to skills, and players who wanted to bulk up on certain skills were forced to work on attributes that connected to those skills, whether or not those connections felt like they made any sense. The other things they connected to were the stats that still exist, Magicka, Stamina, and Health. By freeing up the skills to be built up solely through the practicing mechanic, which has been around from Daggerfall onward, players will be able to build a character just by playing the game, rather than gaming the system.

While I enjoy a fair bit of gaming the system myself, I think it would serve the game to let the player just run through the world and, like an accumulation of trophies or achievements, learn about how their character is developing through leveling events. Streamlining seems to be a dirty word with some people, so I'll call it an untangling, since that is often what we would do while playing these games anyway.

The biggest improvement this system introduces is that for the first time you don't have to anticipate the usefulness of a skill set. You just DO stuff, react to the environment, and your character will grow that way. As long as many choices are viable, a lot could happen to make one player's character different from another, with the player actively choosing the role the character fulfills.  You could still follow the classic archetypes of mage, warrior, or thief, and it seems that the game is geared toward these three major archetypes so that you're still making, at most, a blend of these classes rather than making something unique every time you start a new character. Maybe this might even expand in further iterations to include other classes, or the definitions might expand to allow for more variation. Hard to say, but the freedom in not concerning yourself with which skills you'll need to level would reduce the barrier between the player and the world, while fundamentally changing nothing for people who want to stick to a certain skill set.

LEVELS

Levels are still in there, though. They've been in quite a few role-playing systems back from the very first pen and paper days some 35 years ago or so, and are a fun way to measure your achievements and give you something to strive for. Yet are levels  even necessary? When you look at the skill systems past and present in Elder Scrolls, you could say that each skill, in a sense, was its own level system. Levels were there to give you increases to the three prime stats, health, magicka, and "fatigue", and to tell the game engine to up the challenge levels in encounters, as well as increase the loot generated.

One alternative would be to make the levels hidden, so that players measured success based on skill levels and perks, although that alone may feel a bit bland. Still, it's more than just levels that players try to accumulate. Guild factions would often require certain skill levels to advance in guild rank, and these could be looked upon as character levels in a sense. Instead of levels, players could elect to follow a philosophy, to meet its guidelines and gain perks and increases in that school of thought rather than a generic level, while the game engine still kept track of over-all ability and adjusted challenges accordingly.

It's hard, though, to deny the addictive nature of gaining levels in RPGs, and adding perks to the mix would heighten that quite a bit, just as the perk system did for Fallouts past and present.

STRATEGIES ON HOW TO APPROACH IT

For role-players, there are different steps to take depending on what kind of role-player you are. If you like to keep to a role obstinately, as though your character never changes despite all that's going on around him or her, it might be smart to come up with a plan before you even start your character. Since you choose your race, birth sign (?), and appearance (and some might add sex, but unless Elder Scrolls characters start having babies I'm not sure that really fits), and let your gameplay handle the rest, that freedom may be a bit distracting, letting you flow easily into the two playing styles I detail below. Those of us who will try to use fast travel sparingly or not at all will be familiar with the necessary attitude, but it'll include limiting your character's actions to what you think that character would do, even if that means taking the hard way around a problem, getting rid of nice loot, and saying and doing things that you know might burn a few bridges. From what I've seen, the latter point will be ameliorated a bit by the quest system, which if it works properly will allow you some leeway should you unwittingly or flagrantly cause a complication that might ruin the possibility of a quest (although, how this might water down the experience remains to be seen--  one of the rewards of sticking to character is getting to see the permanent consequences of your actions).

If, on the other hand, role-playing to you is about a character arc, where you may have some idea what you want to start out as, but you're just as willing to let the character change to adapt to the environment, the new system is ideally suited to this. Stick to a similar plan to the above, but then just do what comes naturally, either to you as a player or to your idea of what your character might do. I'm betting that will probably be the most rewarding of the three approaches I talk about here.

If you're not really worried about what your character might think, and are just trying to experience the game directly, there may be times when the skill system will feel a bit distant. Rather than being able to do something well right away you'll have to get your character increase in skill over time, which could be frustrating if the low skill levels prevent you from doing what you want to do at the time. But at the very least the new system removes that obstacle of figuring out which is the best character build for exploration or combat, letting you freely experiment. The one hitch might be that perks, if they're anything like the Fallout perks that I remember, are permanent. You may wind up picking a perk you don't think is useful in the future, which repeats a bit of the old problem of picking a class you don't want, although the overall effect is minor since you can always gain new perks.

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Good read, I was actually thinking about jotting down a few thoughts on this myself after seeing a few heated arguments on the subject.

Reading your description of it, and from what I've read/heard in other places, I can't help but think back to the 1st Dungeon Siege. I don't know how many other games handled it the same way, but I really appreciated how the simple act of using a weapon or spell in that game was what increased your level with it. I'm hoping that Skyrim works similarly.

Levels serve as a quantifiable indicator of progress, which I think is the main reason we love them so much.

Fable III got rid of levels, and I'm still bitter over that.