So say I create the character and distribute his points accordingly, (I have some experience from the Fight Night games lol) what stuff do I need to worry about after the fact. Basically, why would you have these false starts?
This might seem like a sort of convulted answer to your question, but I'm not sure if this has been explained. I think some fellow TES vets have mentioned this in their answers to you but I thought I'd go a little more indepth into it so that you might understand how a "false start" could occur and how its not a BAD thing, but more just an evolution of the game (and also how its not necessarily even required).
In The Elder Scrolls,
there are several skills in the game they are basically how you progress.
There are 3 sub-sets of skills (including birth signs as a fourth)
And example of one of the 3 sub-sets would be Combat:
Block
Armorer
Heavy Armor
Blunt
Blade
Athletics
Hand to Hand
When you start the game you are basically fairly unskilled at all of these tasks. Now lets say I ran up to a monster and started swinging my Longsword. As I'm swinging I'm increasing my skill with "Blade". As my skill increase suddenly I'm hitting for more, and also I can unlock certain stronger combo attacks. All of this happens without you having to do anything other than swing your sword.
In this way you basically decide (through your own actions) how your character becomes more powerful. Every time you perform an action, you are increasing your proficiency.
Part of the fun of the game, is that you never really know HOW you're going to play the game, especially if you have not played an Elder Scrolls game before. You may love casting spells, or you may love swinging your sword. So as we can see, depening on how you play, your character may have better skill with a sword, or with spells.
When you are first starting the game, you can basically choose 5 skills that you would like a "boost" in. (You basically start the game BETTER at those skills than any of your other ones) This is usually why you end up restarting the game.
Allow me to give you an example, lets say when I started Oblivion I chose "Blade, Heavy Armor, and Block" as my skills. As I'm playing I discover that I really love sneaking around. There is nothing STOPPING me to from just stealthing everywhere I go and building up my Stealth Skill, eventually it will max out. Or, I could restart the game and choose Stealth as one of my boosted skills (essentially giving me a headstart).
I hope this makes sense. And is not to confusing. =P I gotta get back to work now....