It is a sliding scale based on guild points.

the higher the points, the higher the caps. It's a handicapping system that tries to keep people within "range" of one another.
Guild Points start at 1000 for guilds that first siege.
0-1000 points, max level is lvl 10. Any toons higher than level 10 will be handicapped down to that level. Skills will max out at level 10 & siege debuff will be applied based on your level - 10. Let's say, you're level 15, you get a 5% debuff to your stats & gear... lvl 15 stats & gear - 5% is negligable vs. level 77, you get a 67% debuff to your stats & gear so it could be a bit of a shocker. Chances are you'll still be better geared, but w/ your own skills capped @ lvl 10, the other group has a chance to fight back.
1001 - 1099 points, max level is 15.
1100 - 1199 points, max level is 20.
1200 - 1299 points, max level is 25.
1300 - 1399 points, max level is 30.
1400 - 1499 points, max level is 35.
1500 - 1599 points, max level is 40.
1600 - 1699 points, max level is 45.
1700 - 1799 points, max level is 50.
1800 - 1899 points, max level is 55.
1900 - 1999 points, max level is 60.
2000 - 2099 points, max level is 65.
2100 - 2199 points, max level is 70.
2200 - 2299 points, max level is 75.
2300 - 2399 points, max level is 80.
2400 - 2499 points, max level is 85.
etc...
The Siege Level is the average of the 2 Guilds' Point Values. ie, guild 1 has 1000 points, guild 2 has 1400 points = 2400/2 = 1200 points. According to the above chart, the Max level would be level 25. So both guilds would have lvl 25 mobs & guards and be handicapped down to lvl 25 values.
Whereas, 2 guilds fighting w/ an average # of points between 2300 - 2399 would have level 80 mobs & guards. The level cap would be level 80, so in-effect, no cap at all ( at the moment ).
I hope this makes more sense.