Delaying levels is very simple; level gains are not tied to skills so you can have a character with several levels but very poorly developed skills other than their main weapon or magic skill thus you have a gimped character on the long run... so you delay leveling up so your character can be more developed skills and make sure they are ready for the tougher battles at higher levels
It is kind of meta gaming but frankly on par to what I have done with earlier Wizardry game to make sure my character develop how I wanted them
You might think it is retarded I guess then DraQ, Octavious, Mond Blut and others like me are retarded and you undoubtedly are the god of gaming you believe yourself to be
The question is, why are you doing this?
Wiz 8 is significantly easier than previous ones and there is absolutely no need for level squatting. I don't consider myself a pro - I rarely play cRPGs these times and e.g Wiz 7 totally kicks my ass and always leads to rage quit. Wiz 8 I finished on normal and expert, without any metagaming knowledge though, which means it's easy enough if you know what you're doing.
I have no idea why would anyone do this - guess there are two angles:
1. Powergaming one - you get a hard on while fighting rattkins in Trynton with your lvl 6 fighters having 100s in sword and close combat.
2. Wimp one - you level squat because you're afraid of tougher mobs that start appearing after certain threshold. You know, like you're one of those people advising not to hit lvl 5 before Arnika road.