Atlus showed off how the demons you receive and befriend in Shin Megami Tensei IV will level up and become stronger from winning fights. When leveling up, your demons will increase in attack, health, and many other stats. In addition they can learn brand new skulls that eventually let them hit enemy weaknesses with more accuracy.
Some demons will also evolve into completely different beings with a feature that is known as High Level Up. With the new feature called Whisper Event, demons can learn new skills. This event will occur when leveling up demons.
Shin Megami Tensei IV releases for 3DS on May 23rd in Japan. No word on a release for any other regions at this time.