Please note that while my information is based on general medival research (mostly done by other people which is yet another step from reality), this is not meant to be a historical reference of its own. It is perhaps an averaging of all the possibles, and leans as close to the Deryni version of things than ours.
All characters (PCs and NPCs) have an Absolute Rank rating which reflets their current standing based solely on their title(s) or lack thereof. Also noted on the character sheet will be the modifiers that turn your Absolute Rank into your Effective Rank. Your Effective Rank shows the level that society accepts you at.
Both Absolute and Effective Rank can and will change throughout a character's life. Changes to the Absolute rating will be related to gain or loss of lands and/or titles, while Effective rating changes will be comprised of variations based on those modifiers, and may depend on how a paticular person rates those modifiers.
Rank is reflective in some ways of political power, but is more indicative of how politically powerful society sees you rather than actual power. Actual power depends very much on the persons involved in a situation, although having known favor or disfavor of those in higher positions may effect your social standing.
Knowledge is the key to social standing. Any given person will react to any other based on what they know. First impressions can be wrong, but most people of nobility try to dress and act to their station so that they will be instantly recognized as such. Also, other factors such as political favor or Deryniness don't come into play unless the person knows these facts. And these facts don't have to be true--rumors can elevate or lower a person's Effective Rank just as easily.
People will usually treat those of Rank above them with deference (although sometimes that deference is tainted by jealousy, it usually is from respect), those below with an air of superiourity, and those of same rank with respect.
Succession of titles generally passes from father to oldest son, and thus the heir of a title is assumed to be almost as good as the one with the actual title. Other sons may get lesser titles from their father, gain titles from dowries when they marry, be granted titles by fathe/king/other noble in reward for a duty given, or they only get what titles they can by their own work (like within the clergy or a knighthood). If they do not gain any titles in any of these manners, they are technically freemen and no longer nobility, and their children will not be noble.
A father who is only a knight (knight errant) will only pass to his sons the ability to also seek knighthood. A landed knight will have that minor title to pass on to his heir, but to his younger sons a knighthood or a priesthood is the only way to keep noble rank. The clergy is done differently than normal society. Within the clergy, the family of the individual in quesiton may have as much to do with his promotion prospects as his ability. To outside society, a clergyman's Rank is related to his position within the Church, but for the most part all clergy are given the respect by all peoples of Gwenydd, regardless of comparison of actual Rank. This is due to the religious nature of the people in general, the power the Church had over lives in general, and the trust put into clergy. This respect depends on a lot of factors, and may change for the Church and/or the clergyman in relation to his actions, the dogma of the Church, and the person being dealt with. Please note that while clergy are listed in the following tables, this is an approximation of how general nobility outside the cloth feel, and is even less codified than the rest of the table.
Also, this determination of Rank applies only to males. Female nobles are treated somewhat differently, and this is in relation to the fact that most women did not have much real power, although they might have great responsibility. Thier Rank reflects how other women see them, as well as how they appear as marriage prospects to men. (Granted, as a woman myself I don't like it much, but it is the medival times.) A woman's Rank is equal to her husband's Rank, or if unmarried is 1 less than her father's Rank if first daughter, 2 less if other than first (not including sons). This reflects how much of a dowry she represents to a potential husband. The same modifiers possible to Rank will affect a woman's Rank as well.
Knights Errant seek lands for themselves, which will move them up the ladder based on if they also get a title. The best way for this is marrying an heiress. If they do not gain lands of their own, they must live by their wits, their skills, and/or their relations. They could garner a position in charge of a castle's guard or the like, which will keep them housed and fed, even if they have no lands of their own.
At any rate, Rank is never changed through the use of experience points. Any changes for good or ill will come from within the game itself.