It's a bit of both, really.

I work in medieval English history, so this answer reflects that background -- I know that other places in Europe used different titles at different times.

Until the fourteenth century, England had only two noble ranks: baron and earl. An earl was the equivalent of a count on the Continent (the same Latin/French terms are used for both, and this is why an earl's wife or a female earl is called a countess). Earls were the higher rank and their number was generally limited to about 15. There were expectations associated with each rank, but these didn't rise to the level of formal responsibilities. Noblemen and women were expected to have an income above a certain level (£1000 per year for an earl has been suggested as the norm), participate in government and provide military service. Earls would be expected to advise the ruler and take on major administrative and/or military roles. Earls were generally members of the oldest landed families in England, and when a newcomer was promoted to the rank of earl, it could cause a good deal of unrest (as in the case of Edward II's favourite Piers Gaveston, for instance). Depending on their interests and capabilities, however, noblemen would participate in these activities to a greater or lesser degree.

While the noble classes were fairly limited in the early and high Middle Ages, the fourteenth century saw a rapid expansion in their overall number and the number of titles being used. Edward the Black Prince was created the first English duke in 1337 by his father Edward III. Dukes outranked earls, and Edward III limited the title to close members of the royal family. Under Edward's grandsons Richard II and Henry IV, more dukes were added and those considered eligible might be from cognate branches of the royal family. Richard II added marquesses (between dukes and earls) into the mix in the 1380s. Viscounts (between earls and barons) came in the 1440s.

Throughout the English Middle Ages, those towards the top of the pile had an expectation that they would be given the choicest positions in government and in war. There was always a bit of give in this regard, though, and a man of lower rank who was a favourite of a monarch or who proved his ability might always be able to move up in power and wealth (and sometimes in title as well). Women were major players here as well, though in a less official capacity than their male counterparts. When a woman inherited a major title, she generally had a proxy (usually, though not always, her husband) to play the official role required of her rank. In an unofficial capacity, many women were major power players and influenced policy from the local to national and international levels.

Today, the ranks are set as follows: Duke Marquess Earl Viscount Baron

I hope this helps!

Citations/Further Reading:

Bothwell, J. S., Edward III and the English Peerage: Royal Patronage, Social Mobility and Political Control in 14th-Century England (Boydell, 2004)

Crouch, David, The Birth of Nobility: Constructing Aristocracy in England and France, 900-1300 (Pearson Education Limited, 2005)

Given-Wilson, Chris, The English Nobility in the Late Middle Ages: The Fourteenth-Century Political Community (Routledge, 1987)

-----, The Royal Household and the King's Affinity: Service, Politics and Finance in England, 1360-1413 (London: Yale University Press, 1986)

McFarlane, K. B., ‘Had Edward I a “Policy” Towards the Earls?’, History 50 (1965), 145-159

Spencer, Andrew M., Nobility and Kingship in Medieval England: The Earls and Edward I, 1272-1307 (Cambridge University Press, 2014)