Level Adjustment is a games mechanic native to Dungeons & Dragons 3rd edition, which has yet to resurface.
In essence, because different possible PC races have different levels of strength, Level Adjustment was brought in as an attempt to provide some form of balance; races with particularly strong benefits, such as Planetouched counting as "Native Outsiders" and so being resistant/immune to various common spells, would be treated as if they were a certain number of levels already before they could calculate their levels. Actually taking levels in a class was treated as multiclassing.
A good idea, in theory. In practice, most found Level Adjustment didn't work out, mostly because of the fact that while you were ahead of the rest of the party early in the game, the level adjustment didn't include crucial things such as Hit Dice, Skill Points or Save & BAB modifiers which added up in later levels, always putting you "one level behind" the other players, despite your fancy spell-like abilities or racial features. You would then struggle to catch up with them as they had less of an XP tax than you did.
Getting Around Level Adjustment
Unearthed Arcana included a rule for buying off level adjustment. Once you were a certain level you could spend XP to remove level adjustment forever. This requires every player character having separate XP for the GM to keep track of, and since XP gain is based on your level relative to the Challenge Rating the GM needed to calculate XP twice for everything (the problem is hardly unique to LA Buyoff however, as death+resurrection, level drain and making magic items could all trigger it). Despite this it worked well enough for LA+1 and LA+2 stuff. Since the rule is OGL, any group that bothers with LA races uses it (though it's possibly the other way around: groups that don't use it find LA so horrible they don't bother with it).
Pathfinder, which was based on 3rd edition, just said no to level adjustments. While the system did include powerful races, they were measurably comparable to each other using the "Race Building/RP" system, so it fell to the GM to either disallow overly powerful races to maintain group balance, but if necessary he had the tools to actually change the mechanics of a particular race.
It also featured superior mechanics for playing a monster, by essentially putting a "floor" under it equal to the party's level (so a player wanting to be a troll would have to join a fifth-level party and only gain class levels from there starting at level 1), then dopplering out as the game went one (giving the troll a free level every three-or-so levels as his monster powers become less and less relevant, until he's caught up with the rest of the party).
Introduced in Savage Species the system is a novel way of getting around racial imbalance. Here the more powerful races have their abilities unlocked by taking actual levels in their specific racial-class, "true" multiclassing that came with the benefits of hit dice, skills and so on, and not some imaginary level that incurred a penalty. The original Savage Species required a player take all levels sequentially, but this was dropped in future incarnation, meaning that players could choose whether or not to take those levels, particularly if it interfered or benefitted their class progression. This would be standard in both World of Warcraft: The Roleplaying Game and Monte Cook's Arcana Evolved series and like many other forgotten subsystems from 3rd edition this would be ported to Pathfinder by Dreamscarred Press.