Experience points for what?

 D&D needs experience points to truly and fully be a game in which player skill and choices matter. Rewarding skillful play and avoiding the subjectivity of DM fiat as much as possible make for a more rewarding gaming experience. But simply having an XP mechanic is not enough -- experience point awards must incentivize the right things to maximize the range of player choice and properly recognize its results. (What's "right" is a matter of debate, but DMs should at least be fully cognizant of what actions their XP systems encourage and discourage.)

XP awards can be broken down into two broad categories: XP for accomplishments and XP for actions. The former is about broad objectives, with little or no regard for the strategies and methods used to accomplish it. XP for treasure is one prominent example. It doesn't matter whether the PC party gets loot by combat, by exploration and searching, by stealth, by negotiation and diplomacy, or by some combination of all. Specific actions are only tools toward a broader goal, and the party is free to choose the tool they deem most appropriate to any given situation.

Besides recovering treasure, awarding XP for discovering locations and landmarks, for entering a new dungeon level, for captives rescued, or for spending treasure (as in many "Carousing" house rules) also fall under the XP for accomplishments paradigm. The important things is that XP-generating goals are defined with an agnostic attitude toward means. Whether the players wish to climb Mount Wyvern or search for the Shrine of Crashing waves, and how exactly those things are to be achieved, are up to them, leaving player agency essentially unfettered.

Experience for achieving story goals and for role-playing can also be considered accomplishment-based XP schemes, though problematic ones, making XP conditional on following the DM's pet narrative or favoring theatrically inclined players over more reserved or strategically minded ones, respectively.

The other model, XP for actions, puts the focus on the means used rather than the goal by granting experience points for performing specific actions, such as fighting, casting spells, or picking locks. Such a model of advancement appears more realistic, but this is one of those times that realism is at odds with the goal of a fun and meaningful game experience. It encourages a most tedious sort of metagaming, incentivizing players to engage in those specific actions, without regard for whether they are useful or productive other than purely for generating XP. A thief in a system that rewards XP for picking locks will find it in his interest to pick every lock, even when there is clearly nothing to be gained by it other than XP. (Ever played an Elder Scrolls game, and taken time to pick the locks of obviously empty cells in order to level up your Security skill? Yeah, me neither.) Granting primary XP for combat encourages the players to pick fights, often otherwise pointless ones. XP for casting spells encourages casters to use spells even when an obvious mundane solution exists, and maybe even to force extra rests so they can regain spells to cast again. To paraphrase a popular aphorism, "When you're rewarded for using a hammer, all the world looks like a nail."

To the old school mindset, a fairly clear and unambiguous but broad objective of the first type is most conducive to creative and freewheeling play. Elements of the second sort may be tacked on as secondary sources of XP. Moldvay/Cook D&D, for instance, uses the classic XP for treasure model as its primary means of gaining experience, with significantly less awarded for defeating monsters. In my experience, this works out very well. Getting the loot without a risky fight is almost always preferred, with monster XP awards being a token amount to compensate players for putting their characters' lives at risk when it is difficult or impossible to avoid combat. 

These days, XP for treasure has fallen into disfavor, roughly corresponding to the rise of storytelling over gaming as the primary objective of playing D&D. For an old school sandbox or megadungeon emphasizing maximum player agency, though, it's a standard that, so far as I know, has never been surpassed. 


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