You got too close to an ancient Dwemer Ruin. Crazy people and monsters live in and around those. You can recognize those areas by the rusty metal architecture. Same thing happened to me on one of my first times playing. Unlike Oblivion, you can actually get destroyed by enemies in this game. :D
Yeah, the level scale is quite a bit steeper than Oblivions. Once you get to around level 3-5ish things will pick up and the game becomes absolutely amazing. Your hits actually connect with the enemies a decent amount of time and you'll start to find some great loot. Also, the main missions of the game may seem a bit dull at first, but it does develop into a grand plot. One full of betrayal, twists, shocks, and revelations.
You might want to try out the Fighters Guild in Balmora as well. The first two missions are fairly easy. Though the third can be a bit tricky for low levels. Also, stay away from the black mountains that control the center of the map, they are extremely dangerous. I'd also reccomend staying away from the area north of Ald Rhun, though it is similar in appearance to areas around Balmora, it does provide a bigger challenge. I would say it would be wise to stay within the area between Vivec and Ald Rhun until a least level 3 or 4.