He must increase and John had to decrease because John's popularity was pretty high before Jesus really started His mission, so then John's popularity HAD to go down while Jesus goes up so that people will be believing in Him. John was setting the way for the New Covenant, it starts with John's new type of preaching of repentance in the wilderness. I believe John the baptist was a priest ? and the way he was dressed was not appropriate for a priest and very wrong according to jewish tradition but that is the beginning of the New Covenant to show that old things are gone and new things have begun.
Jesus being formed in the believers? Do you mean through prayer and having a personal relationship with Him? With time He will build is up and build our roots so that we become more like Him. Walk in His footsteps.