Grant A Level

Grant A Level or level gifting is a special feature that allows you to grant a level to a friend who referred you to the Recruit-A-Friend program, and you signed up for World of Warcraft.

For every two levels you gain you get 1 bonus level to grant other players. Levels you've gained from grants will add to your grantable bonus.

Your friend can even grant bonus levels to your own characters!

From Recruit-A-Friend FAQ (page 2 of US FAQ or page 1 of EU FAQ):
 * Your recruit will need to right-click your target character's portrait and select "Grant A Level."