As the hunters get more experience they will increase in level and get stronger. The aim is for them to reach level 100 and take Reincarnation
Each hunter comes with a rank, Normal, Rare, Superior, Legendary or Heroic. The only ranks really worth keeping are Superior or higher, so as soon you see hunters waiting that are superior, legendary or heroic you can think about banishing a lower ranked hunter.
From time to time you will need to banish hunters, especially if there is a better one waiting to your your town. Check out the Ranks of your hunters and be ready to get rid of your lowest ranked ones. The minimum level you should be keeping really are Superior. It's pretty difficult to get Legendary hunters, but they do drop from time to time.
When you get a new hunter you should try to kit them out with the best armor and weapons, this will help them defeat more monsters and level up quicker. don't forget also to teach then new skills, traits and secret tech.
As well as having ranks, each hunter has a class which determines what sort or hunter he is and what sort of weapons he can wield. It is possible much later in the game to change the classes of your hunters. It's always best to have a diverse team of hunters, so not all beserkers, or all sorcerers.
This game is all about the Hunters, these guys will be ones going out doing all of the work, killing the monsters and trading with you so you get the gold that you need to build up your town.