That's the beauty of the iRacing system itself, essentially it's run, to an extent, like a proper racing series. It has a sanctioning body (called FIRST), and a sporting code by which all drivers should adhere to. Those that don't adhere to it can be protested and in theory punished.
On a more cynical level the protest system is completely closed, you lodge a protest and then you just get a 'protest accepted/denied' style email, no idea of punishment etc. And a lot of people hold the belief that protesting is worthless (I disagree, even if they are lenient for a first offence they do make a note so multiple offences are likely to get more punishment)
But more importantly on a race by race basis is the Safety Rating (SR) of each driver, this (along with a 'minimum participation') are what allows you to race the quicker cars, so you start at a Rookie with an SR of 2.5, if you get that over 3 at the end of a season, or over 4 at any time, you'll progress to D-Class, then C, B and A.
There are also two more levels, Pro and DWC, Pro is achieved by a combination of high SR and a high iRating (which is influenced purely by finishing position, eg it's how 'good' you are). DWC is achieved by being in the top 30 iirc of the Pro drivers at the end of a special championship.
But for mere mortals SR is essentially a case of work up to A Class and then just maintain it. How these reflects on racing is simple, every incident that occurs during a race, from an off track '1x' to a heavy car contact '4x' gets put on your record (against corners taken), this is then used to determine your SR.
As most people want to increase their SR, and hence licence level, the racing is made much cleaner by this rating being there. But it's not without it's issues, firstly it's 'non-fault' eg if someone ploughs into the back of you then you get 4 incidents as well as them, this is mostly evened out by the multitude of times that people won't plough into the back of you
The other issue with SR is that it is 'easy' to keep/gain at Rookie, so the lower level racing has a habit of being much rougher/messier/dirtier than the higher level racing, but that generally keeps itself specifically to the rookie races themselves, as soon as you get to D Class and the skippies it gets a lot cleaner, and even the rookie races are generally quite good compared to some of the stuff I've seen on LFS/rFactor public races...