The Crucible is by far the best way to earn experience in Fable II. Once you pick up a legendary weapon you can continue to play through it as many times as you want to get more and more experience.
Clearly quests are the best way to get experience, most of which is collected when an enemy is killed. Therefore, jobs such as Slave Rescue, which need you to free a group of slaves from various camps around the map, are very good if you can get the work (usually generated randomly throughout the game). Similarly, Bounty Hunter work earns experience, and just exploring through areas such as Wraithmarsh keep your XP coming in regularly.
There are various potions you can find while questing, or, buy them from the various potion outlets throughout Albion. Many give you experience, with the most lucrative, being the more expensive, whereby drinking them instantly gives you XP points into the thousands. Be sure to use them as soon as you find or buy them, it is often easy to overlook them in favour of health potions. Certain augments, most notably the Cursed Warrior and Discipline, earns you XP as you fight (though the former also depletes your health while it is being used.
You can spend this experience on a variety of moves and abilities. It is recommended that you make a special effort to upgrade the likes of Inferno, great for defeating Hollow Men, and Raise Dead, which can deflect enemy attention away from you and is particularly handy while at the Crucible. Of course, while you cannot actually die it is worth upgrading your health repeatedly using the Strength category, as this gives you a better chance in the Crucible and will reduce scarring!
Sleep in as many beds as possible! Many have good properties that can give you experience boosts from using them.
When donating to the Temple of Light you earn experience for each donation of 1,000 or 5,000 gold. You can do this repeatedly as long as you have enough gold.
You can set up a co-op game with a second controller, which then makes a carbon-copy of your character for a friend to play as. Discard all of the co-op character's abilities, then quit the co-op for the second player, gifting all the XP to your main character!
