Adding classes to menu items to signify what level they are
You can use theme_menu_link() in Drupal 7.

function MYTHEME_menu_link(array $variables) {
  $element = $variables['element'];
  $sub_menu = ''; 

  $element['#attributes']['class'][] = 'depth-' . $element['#original_link']['depth'];

  if ($element['#below']) {
    $sub_menu = drupal_render($element['#below']);
  }
  $output = l($element['#title'], $element['#href'], $element['#localized_options']);
  return '&lt;li' . drupal_attributes($element['#attributes']) . '&gt;' . $output . $sub_menu . "&lt;/li&gt;\n";
}


Here I added:

$element['#attributes']['class'][] = 'depth-' . $element['#original_link']['depth'];


Which will provide a class on the list item with the menu depth.