When you increase your friendship with a person to the next level, the next time to meet them you will get a cut-scene. You will learn a little more about their backstory and sometimes unlock new location, items or side quests.

Person 2 stars 3 stars 4 stars
Meracon Will now offer training in weapon skills. Teaches you Feint, and offers training in rarer weapon skills.
Bertram Have a conversation about his future. N/A
Boss New recipies for crafting iron weapons with an enchantment slot. N/A
Xebec Hear a story about one of Xebex's adventures. N/A
Qwilte Judge a pie-baking competition. N/A
Gunsqueak +25% profit from loot sales Informs you that Qwilte has an expanded stock. (not implemented)
Eagan Fight a mini-boss Search for a rare flower together. (and fight another mini-boss)
Liffely New cooking recipes and more food items for sale at inn. Help her protect a shipment of goods from bandits.
Zathus Special Sidequest. (such as fishing or killing a large number of monsters)
Jarrel Allows you to buy the abandoned building to the south of town and open a dojo.
Thorton Expanded store stock, including an upgraded totem.
Connelance Learn some new workbench recipes.
Linus Gain a self-proclaimed rival.
Sallintz Free makeup session.
Millinter Learn to make new types of orbs.
Yeardley Meet Yeardley's new pet.
Ankaba N/A
Horton Fight three minibosses (Evelyn, etc)