Player levels have been a thing since tabletop RPGs like D&D, I believe, if not earlier. And relatively few arcade games I know include leveling systems. The way arcade games are designed to make you pour money into the game include time limits & difficult gameplay with paid continues to avert failure/death, "endless" incremental stages with increasing difficulty and/or varying patterns, and bonuses for paying extra on a play session. I used to work at an videoarcade so I spent quite a bit of time around these things.
Artificial rewards and goals do work, but they're also a product of all gaming, from casual Facebook timewasters to epic AAA adventure titles. It's the nature of what we do. Great gameplay can be its own reward, but without rewards/goals all you've got is a sandbox. There's nothing wrong with a sandbox, but I think rewards/goals are what make a game a game.
It's true, RPG-like levels and unlocks are sometimes used to artifically lengthen a game and provide fulfillment when the gameplay itself is lacking, but it's not necessarily an admission that the gameplay isn't up to par. It can also be a measure of accomplishment to give meaning to activities that might otherwise seem a bit repetitive -- like driving a vehicle in circles for hours, as we fundamentally do here.