It depends on the game type. I generally like the harder settings for the simple reason that I like the game to last longer. However, on some games the hardest setting is just stupid ridiculous (Civ IV *cough*). On RTS games, I'll generally play normal if there even is a difficulty setting for the campaign. FPS: usually hard. I don't even play those types of games much these days, but those seem to be the kinds that actually have difficulty settings more often. I never set the difficulty below normal, unless it's a strategy game with quite a learning curve, and that's just until I have some idea what I'm doing (Civ IV again).
I really can't stand it when games feel like a pushover, unless the game really isn't designed around the idea of player skill anyway, such as a RPG. Of course, I grew up on games that most people would consider generally more difficult than most of today's offerings, so maybe my perception is skewed in that direction in that regard. It might not even be that today's games are easier per se, but just that when you die, you usually aren't set back very much; the Jak and Daxter series is a perfect example of this.
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