Q: So, in Dungeons & dragons, character progression is measured in character levels. The higher level a character is, the more powerful enemy he/she can fight. In TOR, how is character progression done? Do characters get more powerful as they adventure? I don't think characters gain levels in TOR so how do they become stronger, more powerful over time to fight harder enemies?
A: In TOR, you don't have to defeat or even confront powerful enemies. Sometimes, the best choice is to delude them, or avoid conflict whatsoever. And don't worry: still you will be awarded XP. The most important thing is attaining your adventuring goals. You just have to play it smart.
Q: How do you keep track of damage dealt since I don't think TOR uses hitpoints or does it? Such a BIG change in rules from Classic AD&D that I am used.
A: Each weapon has it's damage, which reduces enemies' resistance, what will make them collapse, but not die. There's also a chance for a single hit to kill an opponent instantly. It depends on the weapon's "edge" and enemy's luck on a kind of "saving throw". Of course, you can modify these numbers by improving your weapon or getting a special one, and this is also modified by your character's "body" stat.
Still, defeating the enemy is not the most important thing here. All you have to do is solve the problem the best way available, what includes just fleeing, specially when facing some particularly powerful enemies.
Q: Haven't bought any books yet, still researching with what little resources I have available to me atm. Still deciding if I want to commit to buying the core rule book or not. Money is a little tight for me currently so I really need to make sure I want to commit to TOR or not and I know I do not want to invest in AiMe with its yucky 5th edition rules haha but I do love Middle-Earth. Watched the movies multiple times, never read the books though. I simply adore this fantasy setting.
A: You should definitely read Tolkien's books, maybe borrowing them from a local library. They're much better than the movies, believe me. Peter Jackson misrepresented Tolkien's Middle-Earth. Concerning gaming books, that's up to you.
"For the less even as for the greater there is some deed that he may accomplish but once only; and in that deed his heart shall rest." Fëanor