Level 1 character with LA +2 (ECL 3) kills an Orc: "That was easy!" and he gets a little bit of XP because he didn't learn much from an easy fight.

Level 1 character with LA +0 (ECL 1) kills an Orc: "That guy really put up a fight!" and he gets a bit more XP for it because he learned quite a bit more.

Level-adjusted characters don't find opponents of the same level as challenging as characters with no level adjustment, therefore they don't learn to improve their abilities as quickly and they progress slower when facing the same challenges.

I read a nice article about this a while back on Sean K Reynolds' website, but I can't seem to find it now.