Succession of lands in Middle Ages?

One thing has always confused me as to how lands and titles get passed down.

Say there is King Will. And his eldest, Will the 2nd gets the kingdom when he dies, he gives a lesser title to his second son Peter (maybe Peter becomes the Earl of Whatever). And he gives lands and a title to a knight who served him well. Ok fine.

But now, King Will the 2nd is deciding how to divide things. Obviously, the kingdom goes to his eldest Will the 3rd. But, won’t Peter be passing down his earldom to his son? And the knight passing his lands and title to his son? Does Will the 2nd have to keep making more and more titles? (After all, surely he has other sons and/or knights who need to be rewarded). And even if not, if this keeps going, eventually the earldom of whatever is going to be hardly related to the king and isn’t half the point of this stuff to make sure you are closely tied to your ruling class?