Ship levels are experience levels. The more combat experience your ship (crew) has, the higher the level and the more effective the ship.

If you select a ship, there will be a button labeled "upgrade." If you click the "i", you'll see another upgrade button on the info screen. Finally, if it's a fleet, you click the info button for the fleet, you can select individual ships and upgrade them. They do not need to be in orbit (and I think you can't upgrade them if they are in orbit).

You have to buy or lease the upgrade.

I also think upgrading ships can't defend themselves.

Thanks to all who replied. So there is no way to upgrade a ship without paying right? Only new ships can be built? And about the levels, what's the effect of having a higher level? I didn't see any difference between my 13th level ship and my 1st level one.

On the flagship as a later game warship, one thing a player can do after some miniaturization levels and engine gains in the early mid-game, is to upgrade the flagship simply to make it a lot faster.  That lets it get many more anomalies ....

I had not known that time element!

Thanx!

Maybe in TA, it does that, but I just play DA.

In DA, some new stock ships become do become available as I get new techs, but I never use them.

For example, I never put engines on orbital defenders.  Also, in the early game, I go heavy on defense but try to make sure I have the weapon for which the enemy does not have defense (and must defend with square root).  Thus, even my late early game warships are something like 3-8 attack-defense, because it's not until much later in the game when defenses get over-powered.  Even a 2-6 using the right defense can often defeat early fleets as long as the ship has the right defense type, and as long as one has selected "luck", especially if one has a red base or two.

When I get ready to do upgrades - and some games the only ship I upgrade is the flagship - I will make some designs like 4-10 Sp4 and "4-12 Sp4 MR" and "4-14 Sp4 SR" and "6-8 Sp4 SR" and then compare costs when I go to upgrade the earlier models like, say, "2-6 Sp3 SR"

i try to level up my flagship as good as possible too. On my last game my huge hull size flagship had normally 202 hitpoints but it was trained to level 160, thus it had the impressive amount of 3272 hitpoints. (btw, my deathstar design had 1 nightmare torpedo and 690 hitpoints, and at level 160 it had 11178 hitpoints )

The easiest way to train a ship, is to find a weak enemy with a quite good production so he can replace the orbital defenders quite fast. Then create a ship of the hullsize you wish to have for your later flagship (i prefer huge hulls), but keep the prize of the ship as low as possible.

If the costs of your ship are lower (or not much higher) than the costs of the enemy ship, you can get one level up with each destroyed ship.

If you place military bases around the enemy planet which you use to train your ships, you can keep the costs of your ship low while powering up its offense and defense, so the enemy has no chance and you flagship survives the attacks. Then it's simply a job of destroying each round one enemy defender aand train your ship.

When you think your ship has enough experience, upgrade it to the final (expensive) design.