I was thinking that you could interpret the sentence, "He knows more than he lets on," as he's pretending he knows less than he does. Then I found the dictionary definition. It doesn't always mean to pretend, but it can. http://www.merriam-webster.com/dictionary/let%20on

Do native speakers use the phrasal verb 'let on' very often? Yes, we do. It's quite a common phrasal verb. Does it have the same meaning as the verb 'to pretend'? No, it doesn't. 'To let on' means to reveal that you know about something or to disclose a secret. Everyone knew about the surprise party that was being planned, but nobody let on = nobody gave the secret away

Hello If you asked if someone 'let on,' you would be asking if they admitted to something. 'Did he let on that it was him?' i.e. Did he admit that he did it?