The teams are split into 5 tiers.
Tier 1:Red Bull, Mclaren, Ferrari
Tier 2:Mercedes, Renault
Tier 3:Sauber, Force India
Tier 4:Toro Rosso, Williams
Tier 5:Lotus, HRT, Virgin
At the end of each season, one team from each tier moves down and one moves up. (Depending on their constructors standings).
I am however yet to progress to season 2.