This is my guess, and I would be really surprised if was not accurate. Multiplayer home city level is of course totally separate from single player home city level. The level of your home city is the same as rating in Age of Kings, a 1600 rating in AOK could be home city level 20, a 1700 rating home city level 30 etc. So you gain home city levels by winning games.
I don’t think that you will ever lose home city levels; when you reach your natural skill level you will simply stop gaining levels since you will lose as much as you will win. Obviously it will work in a similar way to Warcraft III online, which is that everyone will get levels even if they lose most of their games in the beginning. After a certain level you will need skill to advance. That way even complete newbies will get the chance of upgrading their home city, thus keeping everyone happy.
At certain home city levels you will have the opportunity to choose between different upgrades for your home city. I predict that some of these choices will be mutually exclusive, much like the way you chose between Gods when you advance to a new age in Age of Mythology. I also think that at certain levels you can only chose between different cosmetic upgrades (i.e. making your city look prettier). It would make no sense if you at the same level could chose between a cosmetic upgrade and an upgrade that effects game play, since everyone would chose the gameplay upgrade.
I also think that most of the gameplay upgrades in your home city will cost resources to actually use. At home city level 30 you may have unlocked the ability to call in some kind of mercenaries from your home city. It would probably be too powerful if you could do it for free, but if you had to spend resources to actually use the home city tech it would be more balanced. It would also give more strategic options to the skilled players and easier gameplay for the newbies since they have fewer things to choose from.
[This message has been edited by MockHamill (edited 01-08-2005 @ 08:55 AM).]