Item levels
The majority of items in Team Fortress 2 have levels associated with them. Levels, viewed with the item name in the loadout menu, are purely cosmetic and do not modify the effectiveness of any weapon or item.
Originally, when the item drop system was first implemented in the Sniper vs. Spy Update, item levels were added by the developers to test if level functionality could be included in the item drop system. Dropped items were given a random level between 0 and 100, and the level would appear under the name of the item, visible to all players. They have since returned as of the August 18, 2011 Patch, but only for hats and misc items.
Random leveling is no longer a feature as of the May 29, 2009 Patch. All new items receive a standard level. However, hats will still receive random levels between 1 and 100, and all existing items with random levels will still retain them.
The Dueling Badges are the only items to change level. The Badge's level increases by 1 for every 10 duels won by the player. Once the Badge reaches a certain level (25, 50, 75), it will change into the next tier of badge, meaning that, for example, you cannot have a level 20 Silver Dueling Badge.
Strange items, with the exception of Botkiller Weapons, do not have item levels, but do have a rank prefix that changes according to the number of kills the player has made with the weapon.