Leveling gives a sense of character progression. I wouldn't feel all that happy if I couldn't level up, personally, even with new systems like AP now continuing the progression. It gives a feeling of "new" adventures (IMHO, anyway)
The other reason is that a level increase is used to reduce the value of old gear (ie. reduce stat scaling), otherwise they would have to somehow patch old gear to make it undesirable. Gear-based character stats are always ridiculously high at the end of an expansion due to the exponential scaling from secondary stats.
Its the bane of percentage based stats like crit and such. While just increasing agility or intellect wouldn't be that bad, if you don't reduce the percentages of secondary stats the entire combat system goes kaboom eventually. At 100% crit there is just a ceiling reached that you can't go over, and similar effects would happen with haste, and mastery with some classes as well.
TL;DR:
Its just a key component of how character scaling and progression are setup in WoW, and changing that would require massive changes to a lot of other systems.
Other games may have used entirely different approaches, and as such comparisons are futile.