A level system based completly on skills would be much better.
I would agree, but that could also be called the ladder.
Something which mixes both (which I think he is hinting at) would be the best. Many games + many wins + beating players who have a high rank = better ranking. Take out any one of the three and you have a system which is easy to be gamed, and doesn't actually show real skill.
Maybe a way to find everyone's "true" level would be where people can only get so high without beating those of a higher level. Once they do they can continue getting points and leveling themselves.