How canon is the level system?

Almost every mob has a level, and the game occasionally pokes fun at the whole level idea (A Journey Home).
Many of them don’t make much sense, why would a random citizen be level 120?
I’d assume it’s just gameplay, but it’s impossible to know for sure.

 

Non-cannon. A xima valley cow isn't stronger than Charon

 

Largely not canon, but large gaps in level are often used to display a power disparity, which would be canon. For example, I made Amber Knell and Which Wroughts Flesh a high level as they are to make it abundantly clear that you are in no condition to be able to actually fight them.

But yes, a silver conure couldn't solo all of the Wynn province, nor is an Aelumia citizen objectively stronger than a silent expanse creature.