In order to gain a level in Morrowind, you must improve your Major and Minor skills by a combined 10 levels. You can gain 1 level in each skill, or 10 levels in one skill, or any combination thereof.
Afterwards, you need to sleep (not just rest/wait, but sleep, either in a bed or in the wilderness), and you will be able to gain a level.
When gaining a level, bonuses will appear, up to +5, for your different attributes, depending on the skills you leveled up since your last level. This includes skills that are neither major nor minor skills. Therefore, increasing these other skills can be a good way to ensure you get a +5 in the stats most important to you. The bonus is defined by the attribute associated with the skill, so therefore, Luck will never get a modifier.
You pick 3 attributes to increase at levelup, so if you have bonuses on 4 or more attributes, extra bonuses will be lost.
It's also important to note that, if you gain more than 10 major/minor skills before you get a chance to sleep, the extras will carry over towards counting for your next level. You will only gain one level for each time you sleep, so if you've gained 20 or more skills, you'll need to sleep at least twice to gain all your levels.
Any attribute bonuses you've accrued go away as soon as you've gained a level, so it's generally preferable to level as soon as you get the 10th skill, or else you're liable to waste attribute bonuses you could have used otherwise.
There is a mod called Cool Enchanted Ambience which allows you to wear enchanted gear without reconizing it as enchanted.
Cool Enchanted Gear Ambience Mod
You see, I very much dislike the bright, glowy enchanted items' effect because (A) It immediately tells you that it's an enchanted item, and I think it'd be cool if it was harder to tell, and (B) it looks stupid. So I went into the editor and set all the magic effects' ambiences to 50 lightness, 0 saturation with a negative effect. This gives them a shine instead of a bright glow. Also, it means you can't tell at a glance what NPC's enchanted items are, even if you know that they're enchanted. And it means having a full set of enchanted Imperial Steel looks really, really cool. ^_^
Appearently some people don't like enchanted armor since it sucks and no one likes glowing enchanted armor [Of course, to show that it's enchanted, it neds to glow, but people can hide it using the mod].
Another mod is called Subtle Magic Glow Mod which allows enchanted items to have a different look too
Subtle Magic Glow Mod
Subtle Magic Glow replaces the 'plastic wrap' around in-game magic items (those equipped by characters or on the ground) with less-obtrusive versions. There are three available: A more transparent version of the Bethesda original, one that is faint, but nonmoving, and one that is nonmoving but slowly fades in and out.
The look of enchanted gear now has a different look, kinda faint look.
Best Answer
Armor's actually pretty lousy for enchanting. Most of the light and medium armor tops out at around 20 points of enchantment. If you want to enchant light armor, the best pieces are glass cuirass (12 points), Telvanni cephalopod helm (an astonishing 100 points), glass greaves (10 points), glass boots (10 points), glass or chitin bracers (10 points each), and a glass tower shield (45 points). Pauldrons are uniformly bad (no more than 1.5 points each).
The best generic armor options without regard to weight are the Daedric Cuirass (60 points, heavy), Telvanni Cephalopod Helm (100 points, light), Imperial Chain Pauldrons (7 points each, heavy), glass greaves (10 points, light), Daedric Boots (26.3, heavy), Daedric Gauntlets (60 points each, heavy), and the Daedric Tower Shield (225 points, heavy).
If you want to attach powerful enchantments to ordinary wearable items, though, you want to focus on clothing. An exquisite shirt (60 points), exquisite pants (60), exquisite skirt (60, and yes, you can wear it with pants), exquisite shoes (40 points), an exquisite robe (40), an exquisite belt (40), extravagant gloves (20 points each, but mutually exclusive with gauntlets or bracers), two exquisite rings (120 points each), and an exquisite amulet (120 points again) will give you far more enchanting opportunities than any armor.
(Source: Ultimate Elder Scrolls Pages, items listing)