Experience is an indicator that every ability has. It tells you how much or how often you have used that ability. Every ability can have up to 100% experience and then it can be upgraded to enhance it in some way.
All abilities can be upgraded three (3) times to level II, III and IV. To upgrade it you need to use a scroll, it can be Universal or the bending type of the ability you're trying to upgrade.
When getting to level IV, there are two options for each ability. Each choice provides a different benefit. For example, flamethrower can either upgrade to a very long-ranged precise version, or inaccurate flames that create fires.