Your spells "level up", depending on how much you use them. If you only use Ice once in the game, it won't be worth anything -- if you use it constantly, it'll grow stronger, take more MP to cast, and become much more destructive.

This is the way they did FF2. There is no "Ice 2" spell, your "Ice" spell simply levels up and becomes more powerful. Likewise, your characters won't level up per se, they will just gain whatever attributes they use most -- become more powerful with the weapons they use most, gain more max HP if they get their HP taken down a lot, gain more max MP if they use a lot of MP, etc.