I mean, you probably wouldn't notice the difference between a 2nd Dan and 8th Dan if you didn't do Iaido for a few years. It's not a discipline that is easy to notice differences in skill level past a certain point.
How does it work, i mean the whole organisation of the tournament and demonstrations ? Because i'm still a newbie here so for my point of view it's kinda messy... But i know that it got a real ( and maybe deep, sorry if it does) meaning; so i would like to know.
There are no tournaments in the usual sense; Iaido is not competitive in that way. There are tests for gradings, and there are demonstrations (called "embu"), but no man-against-man competitions as you'd have in Judo or Karate-do. Instead, each entrant will perform a kata/waza and be graded on his or her performance, and the best performance wins. (In that respect, it's similar to the kata competitions in karate tournaments.)