In regard to holsters they are talking about the levels of retention. Modern open carry holsters usually have some sort of retention device, whether its a thumbreak snap just to keep the handgun from falling out, or a lever lock to keep a suspect from being able to grab your weapon. Most LEO's opt for level3 retention as this will keep a suspect from unholstering the weapon if the officer is involved in a scuffle.
With body armor it refers to the level of protection. For instance, level 2A will stop the more common 9mm and .357 threats. Level 3A will stop almost all handgun threats and level3 and 4 are for stopping rifle threats.