I was reading gdunbar's journal entry on difficulty levels in games. He comments both Jeff Vogel's idea that games should always be simpler than you think, and Rampant Coyote's general beheading of difficulty sliders in games.
Reading through these posts got me thinking. I agree with Vogel that senselessly hard games offend me while trivially simple games at least give me the satisfaction of winning. I probably won't replay them for the challenge but I got to experience the full content. I can also see the point Coyote makes about difficulty adjustments are arbitrary and doesn't give you anything more than either making it harder to win or harder to lose.
In many games a central part of the concept is that the player has some advantage over the enemies. Be it some flashy set of supernatural powers or the ability to leap out past corners bullet-time-style guns ablaze, there's always some reason why the player can take on hundreds of enemies in a fair fight. I'm thinking that instead of arbitrarily making the bad guys harder to kill, a harder difficulty level could be achieved by permanently taking away some of this player edge. This has the benefit of being a) not arbitrary since the player knows exactly what he is missing and why this is making the game harder, and b) well integrated into the design since you only remove things, not changing any values.
This has been done a lot before. For example the Final Fantasy series uses it from time to time to make it more difficult, taking away player core abilities. I think that if you know exactly what you have lost then you'll end up really missing it.
In conclusion, by removing player ability and edge to form higher difficulty levels you get an obvious, acceptable increase in difficulty that also brings something new to the gameplay experience. Maybe the player must tackle the same challenge differently if he doesn't have all abilities. Additionally the ground state difficulty (or easy) will give you all the cool content you want if you only aim to play through the game once.
