‘Reading Level’ can help you fix Google Panda?
Many of you might have already spotted this Google tool in the search results. You can find it in the “More Tools” on the left hand navigation bar of search results.
What does Google Reading Level mean?
Google has indexed the content on websites based on their volume, depth and originality. I assume this has close relation with the Google Panda update where duplicate and low quality content were discounted from search results. By knowing the depth of content on a website, Google can serve the results based on the user’s preference.
Let’s say the user googling is a scientist and he’s researching on his new thesis, he would like to learn deep about a particular subject. In this case, the reading level is advanced.
Meanwhile, a regular user trying to know the price of a gadget to buy might only need to know the features and price of the gadget, no deeper study here. Basic reading level.
So if Google categorizes your site into advanced, basic or intermediate reading levels, its a clear signal of its understanding about your content depth and quality.
Is it related to Google Panda update?
I can only assume that a website categorized as low quality content will be either assigned to basic level reading or below it (which means in neither of the categories). And you are in the good books of Google if you’re in intermediate or advanced level reading category.
Okay, that might sound too optimistic but the point is that its closer to the assumptions. Tons of good quality content means advanced level reading and Basic Level means “low” quality OR good quality but lesser depth/volume in content.
I would obviously like all my sites to be in the advanced/intermediate level, just to be sure.

I think you’ve got this wrong I’m afraid…
You’re making the assumption that an advanced reading level equates to advanced (i.e. better) writing.
More advanced writing should actually equal a less advanced reading level; therefore making the content more accessible to all reading levels.
I think the reading level (likely determined by sentence and word length) will more likely be used in the context of Panda to determine whether there is a correlation with content that already exists in that subject area.