Virtual Level

A player's Virtual Level (VL) is the highest level they have ever achieved in Fallen Sword. The VL is used for determining if two players are in attack range of each other, which is plus or minus 5 levels. (See PvP)

Purpose

The virtual level was created to prevent PvP abuse. Each time a player gains a level, they are awarded two level up points which may be used to increase a player's stats such as attack and damage. If a player gets de-leveled in PvP attacks then he or she keeps the level up points. Therefore, it is possible that a player can lose many levels and have a large stats advantage over other players the same level. Using the Virtual Level as the determining factor for which players are in attack range prevents this abuse.

Flaws

When a player is de-leveled then they do not get the stats bonuses from any items of a higher level. This leaves a de-leveled player at a big PvP disadvantage because players of a higher level can attack them with better items.

The virtual levels feature is calculated based on allocation of level up points (those you get 2 of each time you level up) so if you do not allocate them on your stats, your virtual level can be decreased. You can also reset your skill points in order to be subject for virtual level reduction. (forum ref)