Instead of only choosing your characters first name, you choose their surname, then their first name (or use the random option)
What happens is you have two records of your level - current level, and top level gained. Top level gained only goes up when your current level exceeds the top level.
When you die your back to first level! And the first name is gone - that guy is dead! Your 'character' is known by his surname, because your playing a family heritage, not one guy.
However, by paying money and using certain items (that can only be used X number of times per RL day), you can boost your level back up to your top level gained. The smaller the gap between current level and top level, the less you have to pay. Also paying only lasts for awhile, so although it's alot like most traditional mmorpg, it's not always that way and by default, if you don't have the money and items, your back at level one.
Indeed I think ages ago I heard of some game that used a family system along with perma death, but I can't remember it.
Wiqd and Psychochild both have some articles on generational mechanics. I don't have links offhand, but I'll look for them later.
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