So I'm new to the d20 system, having left the D&D game system back in the AD&D days. I've never even owned a D&D 2nd ed book, and only own the 3 main 3.0 books, think the are still shrink-wrapped.
I'm looking at NPC's and figured the "Average" persons level was 1.
And most people throughout life never really advance past 1, or orc / goblin / kobold raids on villages would not be to traumatic.
Looking at the NPC classes the weakest and most common class would be commoner. Now this is expected, what that leaves possible is Joe Serf. Hes been farming his land for 15 years. Its a hard life. So he as the Skill Survival for weather prediction, and Craft: Farmer
So at what point does Joe serf start gaining levels
And in order for Joe to become a good farmer, he needs to level so in the end. In order to have a competent serf capable of farming his land with enough profit he local lord wont toss him off the land you end up with..
Super Serf
1d6 hp's per level, its entirely possible to have. Super Serf, 50+ hps, multiple attacks starting at lvl 12 and proficency in a simple weapon

If you extrapolate this into Blacksmiths and Herbalists using the Expert class you get even more hps and even better combat skills
So our blacksmith wishes to be competent at his craft, to the point were he is concidered a master of his craft, (aka can take 10 and make a Masterwork weapon) He will have to be at least 7th level or more.
And any craftsman would be remiss if he didnt take the master craftsman feat for those "special" items he wants to make

Wonder if Super serf takes the master craftsman feat for farming, does he get a bumper crop?

So at what point does Joe serf start gaining levels
And in order for Joe to become a good farmer, he needs to level so in the end. In order to have a competent serf capable of farming his land with enough profit he local lord wont toss him off the land you end up with..
Super Serf
1d6 hp's per level, its entirely possible to have. Super Serf, 50+ hps, multiple attacks starting at lvl 12 and proficency in a simple weapon

One of the best parts of the 3.xe DMG is the rules addressing exactly this - settlement size, NPC class/level... Pop open that DMG and read Chapter 5, Campaigns. None of that made it into PFRPG which is sad, chapters 4 and 5 of the old DMG were very useful.

Most commoners will be level 1, there's not a legalistic "so many XP per bale of hay" rule, but in a given community there'll be some exceptional folks. They do a sample hamlet of 200 that has mostly (166) level 1 commoners, a mix of level 1 "everything else," and then 6 third level guys of various classes (commoner, expert, fighter, cleric, rogue, warrior in this case - but it's randomized). Even most soldiers are first level, and warriors rather than fighters.

They're rare, but in some cases yes, you can have uber high level commoners.

Then how do you determine who is competent at any skills, since most people will be limited to lvl 1, and therefore only have 1 rank in a given skill?

Then how do you determine who is competent at any skills, since most people will be limited to lvl 1, and therefore only have 1 rank in a given skill?

Commoners still have class skills for the +3 bonus, and most professionals will use their single feat for Skill Focus.

And the really good farmers, as opposed to your average run-of-the-mill-hardly-making-a-profit farmers, would be Experts instead of Commoners, and may even have a level or two extra :)

Yeah, most farmers are just level 1 commoners, that's still a total e.g. Profession:Farmer total of +4 on average (7 gp/week income). And usually they have a big family that is also working the farm for an assist on the total roll. Slightly wiser farmers do better.

There have been long articles written on the economics of D&D commoners, but my summary is "it works out pretty well..."

It's those experts or higher level commoners who commit the more impressive acts of farming - breeding new strains of livestock, etc.