As an older player of Dungeons and Dragons, there are aspects of the game that are only now glaringly apparent. For player (that is PCs), the challenge of the game is primarily resource management. The resource is their character. Players need to balance their character's remaining hit points against remaining spells and gold. There really aren't enough demands on player gold, but that's a topic for another day.
Players invest their real world time (that most precious and non-replenishable of resources) into building increasingly high level characters. To do this, they must risk the very asset that they wish to improve: their character.
This risk is a lot like that of the traditional gambler, who puts his money at risk to make more. The desire of the gambler is, obviously, to make more money and not lose his original stake.
Of course, PCs aren't quite in the same boat. In D&D, you don't get much reward for killing 8 kobolds. You have to keep killing monsters until your characters levels up. This is like playing tournament Texas Hold 'em. You can't stop; You're totally committed.
Others in the old school blogosphere have lamented exactly this discontinuous reward system that frankly defines D&D and many other RPGs (including Fallout).
It might be a good idea to reward the players for smaller milestones. In particular, award hit points every several hundred experience points instead of a lump sum at the time of leveling. This is most critical at the first few levels. Users of magic can get additional spells normally -- that is less critical to survival. Thieving abilities might similarly progress at a sub-level event threshold.
It feels very cruel to make players invest perhaps dozens of hours of play to have their characters get to level 2. This fails to reward good play, narrow escapes and hard-won skirmishes along the way. If poker worked the same way, few people would play it.
One might reasonably ask what does the Dungeon Master risk and what is his pay off, but that will have to wait for another day.