Backgrounds, skills, and legacies
Your level represents the number of dice you can roll in total on a test, but backgrounds, skills, and legacies are where you get those dice. Skills are things you've trained yourself to be good at, legacies are accomplishments and behaviors you're known for, and backgrounds summarize your character by combining several skills and legacies together.
Skills and legacies
Skills and legacies are dice that you will eventually collect into backgrounds. They start as d4s and can grow to be as powerful as d12. Before you roll, if you are doing something related to a background you either have or want to have, you can spend potential to write it down or level it up to the next largest die size, to a maximum of d12. You can also level up the die whenever you do something and it makes sense that you'd level up or gain a skill or legacy as a result.
It doesn't really matter whether a die is a skill or a legacy, but whether it's something that you're good at or a reputation that you're known for can be helpful in determining what makes sense for how to level it up. For example, it makes sense for a player to be able to level up or gain a new skill when they spend some time training or gain a flash of insight from seeing something cool that they or somebody else did. Separately, it makes sense that a player could level up or gain a new legacy whenever they do something memorable or act like their reputation.
Renaming a skill or legacy
Leveling up a skill or legacy can also be an opportunity to refine it. Whenever you level up a skill or legacy you can also rename it to better represent the skill or legacy that your character is developing.
A character with the skill Spotting Traps narrowly avoids the last arrow trap of a dungeon and gains insight, spending a point of potential to level up the skill. As they reflect on how it might be less useful back above ground, they decide to rename the skill to Quick Reflexes as they level it up.
A character with the legacy Wanted Pickpocket acts like their reputation and spends a point of potential to level up the legacy by formally accepting membership to the Blackgrass Thieves' Guild. Not wanting to limit themselves to picking pockets, they change the name of the legacy to Blackgrass Thieves' Guild Member.
A character with the skill Research spends days trying to crack the secrets of an alien artifact, working with a librarian to help train them in getting better at researching. To represent both the newfound knowledge and to help them get more specific answers in the future, they decide to rename the skill to Extraterrestrial Research as they level it up.
A character with the legacy Monster Hunter does something memorable by landing the killing blow on the dragon who has been terrorizing the countryside and spends a point of potential to level up the legacy. Since slaying a dragon is surely more impressive than the other creatures they've defeated, they decide they'd rather the legacy be named Dragonslayer.
Abandoning a skill or legacy
Sometimes a skill or legacy might not work out for your character. Maybe it was too specific, just isn't very useful in the long term, or your character has had a shift in priorities such that what you wrote down no longer makes sense for them. In that case, you can always choose to forget.
During any period of downtime or whenever else it makes sense you may decrease the die level of one of your skills or legacies to reclaim one point of potential. This can represent the public's waning attention to your deeds in the case of a legacy, or your character losing interest in or forgetting about that skill in preparation to learn something new.
Building a background
If you have at least two related d12 skills and/or legacies during downtime or any other time that makes sense you can combine them together to form a background. Similarly, if you have at least one d12 skill or legacy related to one of your existing backgrounds you can add it to that existing background.
To create a background, write down a phrase that summarizes the skills and/or legacies as they relate to your character followed by the number of d12s you put into the background. Then erase the old legacies and skills -- they're part of the background now! The next time you make a new legacy or skill, you can reuse the name of one of the skills or legacies you just erased to represent additional reputations and capabilities beyond what the background describes.
A character has a d12 Acrobatics skill and a d12 Robs from the rich to feed the poor legacy, they can combine them together into a 2d12 background called Robin Hood of Crookshack Row.
The same character develops a d12 Thief of Luiena's Crown legacy. Since this is relevant to their 2d12 Robin Hood of Crookshack Row background, they can add a d12 to that background and rename it, turning it into the 3d12 Crownthief of Staedbergh background.
Renaming a background
Whenever it makes sense for the name of a background to change, you can rename it to something else. A Bloodthirsty Warlord might become a Repentant General, an Assassin for Hire might become a Silencer of the Court, or a Master Blacksmith might become the Silversmith of Ardent. Sometimes the change is less story driven and more that you've come up with a better name to describe that grouping of skills. That's fine too! Backgrounds should be renamed until you're happy with how they express your character.
Naming guidelines
Don't worry too much about coming up with the perfect name, it's often enough to create a good name. Skills and legacies are just the building blocks of backgrounds and backgrounds should be renamed until they feel right.
That said, the trickiest part about creating skills, legacies, and backgrounds is coming up with a good name for them. Ideally the names should be expressive of what you want your character to be able to do while still remaining general enough that they can come up a lot in play.
Naming a skill
Skill names should focus on a specific capability that can be learned or taught with names like Biology, Swordfighting, and Archeology. They sometimes almost sound like the names of academic courses! If you're struggling to think of a good way to name a skill, just try filling in a blank in the sentence "I'm good at _______." with a phrase that describes the skill. Whatever you fill the blank in with is likely a great name for the skill!
Since the way you level up your skills is by taking some time to train or gaining a flash of inspiration, be sure to think of how you'll train those skills and scenes that show how your character was able to innovate on their own based on something they saw or did. Archery can only be leveled up when you pick up a bow and arrow, but Marksmanship could be leveled from excelling at a game of darts!
Naming a legacy
Legacy names should focus on your character's reputation and things they've done, but should also represent the developing nature of the legacy. Legacies can be a phrase describing your displayed values, a title awarded, or anything else that showcases your budding reputation. Legacies are also a great space for representing ranks in factions-- joining any faction and advancing in rank are both definitely doing something memorable, and acting in line for that faction will always be acting like your reputation.
Since the way that you level up your legacies is by doing something memorable and acting like your reputation, make sure to think about how you'll level up your legacy as you write it down! Robbed a noble can likely only be leveled up whenever you rob someone or talk about how you did, but Steals from the rich to feed the poor can be leveled up both by being a thief and whenever you perform an act of charity!
Naming a background
A good rule of thumb is to name your background something that you might use in a sentence to describe your character. Backgrounds could be jobs like Blacksmith, Hacker, or Guerilla Sniper, roles like Healer, Tactician, or Tank, or even quick descriptions like Outcast of Newport City, Penny Pinching Accountant, or Iron Willed Gunslinger. Really, there's not much of a definition for what a background can or can't be; if it sums up both an aspect of your character and the skills and legacies you put into it's probably a good background!
Additional examples
Here are some additional examples of skills based on a attribute they work well with, and some background examples of how they might be combined. While skills are never limited by what attribute you use them with, sometimes thinking about what attribute you want to improve will help you decide on what kind of skill to learn.
Skills to augment Agility tests primarily focus on a character's dexterity, flexibility, and physical speed. Some examples are Acrobatics, Rubix Cube Solving, and Sneaking. If you were to combine those three skills, you could create a background named Criminal Mastermind.
Skills to augment Brawn tests primarily focus on a character's fortitude, endurance, and physical strength. Some examples are Breaching Doors, Lifting, and Swimming. If you were to combine those three skills, you could create a background named Military Commando.
Skills to augment Intuition tests primarily focus on a character's awareness and ability to improvise. Some examples are Driving, Gambling, and Streetwise. If you were to combine those three skills, you could create a background named Getaway Driver.
Skills to augment Knowledge tests primarily focus on a character's education, ability to retain facts, and their ability to understand and apply complicated concepts. Some examples are Bandit Culture, Political History, and Sewing. If you were to combine those three skills, you could create a background named Gang Savvy Granny.
Skills to augment Presence tests primarily focus on a character's social ability and their ability to inspire emotions in others. Some examples are Animal Handling, Bluff, and Political Appeal. If you were to combine those three skills, you could create a background named Druid Politician.
Skills to augment Will tests primarily focus on a character's ability to shut out distractions or act despite hardship. Some examples are Acting under Pressure, Ignoring Pain, and Spirit. If you were to combine those three skills, you could create a background named Force of Nature.