Destiny really isn't any different than any other MMO-type game where you level. We'll take WoW for example. There's a soft cap level...20 for Destiny, 90 or whatever it is for WoW. Afterwards, you start grinding for gear, be it either outright drops or getting some type of money to buy it. The ONLY difference is that Destiny makes it clear how much higher of a level your armor makes you while WoW hides it behind item level and makes you do your own math.
Saying you're a level 28 in Destiny is the same as telling people in WoW you're ilvl553. It means you're capped on level but here's how good my gear is. If you've ever raided in WoW, people often ask for you to be a certain item level. Destiny is making it easy to do that because you can see it by default.