I prefer difficulty settings that are centered around adding replayability rather than catering to different skill levels. Oftentimes with the latter you end up with one difficulty that the game was
actually designed around, with the others scaled up or down from it in ways that aren't interesting or well thought out (e.g. Doom/Quake are meant to be played on Ultra-Violence/Hard, as lower difficulties lack critical encounter design and Nightmare is just dumb). The effect is multiplied when the player is given separate tuning variables for features of gameplay, resulting in a matrix of possible variations that can be tough to sift through to arrive at an engaging experience. I'd rather the designers focus their efforts on designing a small handful of carefully tuned difficulty modes which provide some incentive to come back to the game once it's been mastered, or dispense with the notion altogether (replayability can come from other factors, like RPG build variety, self-restricted challenge runs, and so on). I won't complain too much about being able to tweak modern games to provide an adequate challenge that wouldn't be marketable to a broader audience, but it's a paradigm that I think has less potential for varied and interesting experiences.
Having said that, I strongly disagree with the popular mantra that the Thief games were meant to be played on Expert from the getgo. It seems clear to me that the intention was for the higher difficulties to add replayability to the missions via new objectives, less player health to make mistakes more punishing, and new stipulations on gameplay such as no kill restrictions which invalidate some of the player’s recovery options (if you start on Expert, you'll rarely get to play around with broadhead arrows, fire arrows, or mines). Once you've learned the mission layouts and gotten the hang of the stealth systems, you can challenge yourself against tougher guard arrangements, scarcer resource placement, and more thorough burglary requirements for levels that you've already been through. This is
one of the reasons I prefer the first game -- T2's Hard difficulty is equivalent to T1's Normal difficulty in player health and additional objectives, so it can be thought of as the default difficulty, while T1 had a genuine Hard mode that was an intermediate step between the freedom of Normal and the constraints of Expert.
Thief's difficulty model was
directly inspired by Goldeneye, which also added new mission objectives and altered level features, guard placement, and item pickups in addition to raising combat damage. Perfect Dark does the same and it's implemented with more intelligent tracking of mission objective states and some really clever mission ideas -- for example, in the Carrington Villa hostage rescue mission, you start on a cliff with a sniper rifle on the lower difficulties to save a negotiator who's been led out to the docks to be killed, while on the highest difficulty you actually start
as the negotiator and must fight through the villa from a totally different starting point with different equipment. Replaying on harder difficulties really requires you to know the levels inside and out and features much more punishing combat as well.
A lot of the Castlevania games have featured
excellent Hard modes, even as far back as the first NES game which had multiple NG+ cycles with new enemy placements like in Dark Souls 2. Especially interesting is the two-pronged approach to replayable harder difficulties in several of Igarashi's games -- you can either play Hard mode NG with a fresh character, or you can play Hard Mode NG+ with your old gear but locked to max level 1, with enemies dealing extra damage on level capped playthroughs to account for the gear transfer. In addition to statistical differences, enemies often feature new behaviors (most as simple as speed or range increases, but some will have new and empowered attacks). Weighing all of these aspects, Portrait of Ruin had the best Hard mode in my view -- Order of Ecclesia was broadly similar, but the number tuning made it more frustrating from what I recall. On a related note, Bloodstained: Curse of the Moon is
expertly designed around its various modes (separate from its Veteral/Casual choice, whose only valid answer is Veteran), which present a clever ramp in difficulty via its character system, changing how you have to engage with the same level content on repeat playthroughs.
System Shock 2 gets an honorable for modulating stats in an intelligent manner. Player health and psi scale with difficulty, as do the nanite cost to buy things in replicators and the cyber module cost to purchase character upgrades. I'd add more to this (nanite cost for healing and respawning, camera detection time, AI parameters, resource distribution, etc.), but it's a decent start for a game focused on survival and careful character building. I already complained about individually tunable sliders in this post, but System Shock 1's 3/3/3/3 difficulty is pretty intense thanks to the global 7 hour time limit. It's something you can only do on a second playthrough once you know where all your objectives are, and the task of optimizing your time spent exploring for valuable resources vs. beelining to the critical path adds a whole new dimension to the game. The time pressure also
fixes a lot of the incentive to rely on degenerate strategies, which is noteworthy even if the second game did it more elegantly with a tigher resource economy and the threat of constant enemy respawning.
The "realistic" difficulty in Deus Ex is beautiful because everyone dies quickly. High stakes, big rewards.
I'm not sure if you were implying it's the case, but the common myth that enemies die more quickly on Realistic difficulty isn't true. It only affects combat damage taken by the player. In truth, Deus Ex's difficulty settings are quite poor -- On Easy/Normal/Hard/Realistic you take 1/2/3/4x combat damage. Considering that the base damage on the pistol is 14 and you take double damage on the head and torso, this means that enemies on the first level can oneshot you on Realistic difficulty (14 x 2 x 4 = 112; you have 100 head and torso health), while the later enemies wielding Assault Guns will just pepper you with 3 base damage a shot which is easily mitigated by the Ballistic Armor aug. It's an inverse difficulty curve where the beginning of the game is brutal and the later sections are comparatively trivial. Not to mention, it's very lackluster to have difficulty affect
only combat damage in a game with such a significant stealth component. A disquieting number of stealth-oriented players will reload their save the moment they're spotted anyway, so a Realistic stealth playthrough is essentially the same as an Easy stealth playthrough.