It's exactly like the method from Cave Story. Enemies drop Gs and they power your weapon to a maximum of level 3. The only thing that's not like in Cave Story are the differences between levels. I've avoided changing the damage, because my weapons use ammo and if you do less damage and lose the same amount of ammo (or even more ammo because of the lesser damage), the player wouldn't use the weapon if they are not maxed. So every level changes something different for each weapon. For example the clip size, reloading speed or rate of fire.
If a weapon is on level 3 and you've found a special power-up, they will get an alternate fire mode as a bonus.