Oh that's the best part.
All incoming and outgoing damage is personally scaled. So from your perspective your level 3 buddy is doing a lot of damage and from his perspective your a manlet.
That has been going on in WoW for years. Welcome to nuu-gaming.
EDIT:
The obvious outcome.. that literally anyone but a retard monkey at blizzard could of told you was:
You lose all sense of progression
and worse than that - You feel weaker the higher level you are - because your items scale worse for you
Imagine a game design where the more you level up the weaker you fucking get. Brilliant.
It's your choice whether you want to see the glass as half-empty or half-full.
Is it really a problem that you can group with your friends regardless of your levels or is this a solution to the problem? I grouped with a level 25 when I was level 13 and it was great. He wasn't overpowered, I wasn't underpowered. It was just like I was playing a brawler like Double Dragon at the arcades and someone else joined the game.
All the progression systems still function perfectly. You don't get any less XP because you're partied with a high level player. You both get your own drops appropriate for your level. You don't feel weaker the higher level you are until your items are getting old but the system to extract the legendary aspect from an item then attach it to a new one means you can keep your favourite item for quite a long time. It does all scale but it seems to be done really well.
Sacred 2 is an example of scaling done poorly. I remember I even started again just so I could pick 1 skill and never get another one because it would make me weaker. It didn't feel like this in D4. In fact, using Barbarian as an example, I started off feeling quite weak but as I gained more skills though levels and found good items I ended up feeling very strong.
Edit: So, I was just wondering how far the level gap could be and I think the limiting factor will be the World Tier. Anyone can start on "Adventure" (easy) or "Veteran" (normal) but you need to be level 50 to start playing on Nightmare, where a new tier of items start to drop. Then even higher there's Torment where extremely rare Ancestral tier items start to drop. Bliz said Ancestral items are so rare you might only find 2 or 3 a season.
I guess if a level 90 was happy to play on Veteran they could still play with a level 10 friend but the level 10 wouldn't be able to join a Torment game. The only thing would be the level 90 probably wouldn't want any Veteran world tier items, but I assume they'd still get xp and appropriate level drops up to Legendary quality but no Sacred or Ancestral, which would be what they want for gear progression.