There are replacements for most of the skills as we progress in levels, however it's not all neatly laid out for us, players have had to discuss and figure it all out for themselves. And there are still discussions and debates going on about which skills are upgrades for what.
On the SoE site, in the Guardian forum there's a very long post going on and a list that is being constantly upgraded. Probably worth taking a look there in the Paladin forum.
As for the actual level of skills, it's exactly what you might think. Each level of skill/spell does more damage, heals better etc. The trick is working out which ones are worth spending big money on, and which you will only use for a few levels.
Whatever you decide, try to get App 3 or 4 at least, which are player made. If you're into crafting you will be able to make the first few yourself.