Actually, in my experience each level gives cities +10% population cap (applied to planet's overall cap), at least for carbon-based races. Silicon-based cities seem to get +0,5 flat cap/level.
Strictly speaking, each +1 bonus from a tile raises the improvement 1 level. What one level means is dependent on what the improvement is and what code level of GC3 it is, since Frogboy tends to play with those a lot. My +1 population cap for a city example was remembering it from what it was when it was introduced, you are correct as to what it means now.
