When designing games, one aspect that often requires rigorous amounts of testing is the difficulty curve. The developers themselves can, will, and indeed do, test their own game while making it, but as the developers of the game are so intimately familiar with it and spend so much time involved with it (for obvious reasons), oftentimes they can become desensitized to the difficulty some levels or areas may have. This is the reason that other people, unaffiliated or otherwise mostly uninvolved with the project at large, are brought in to help with game testing, as a fresh pair of eyes with little knowledge of the game and its mechanics provides a perspective closer to what most of the game's buyers will likely have: going into the game with little to no prior knowledge.
If the game devs have gotten so used to their own skill and testing of the game that they've made the game difficult for themselves – instead of difficult for the main group of consumers – then it's likely that the project will need to undergo a large shift. The levels may need to be tweaked or even overhauled outright, in order to make sure that the game has a proper, smoother difficulty curve.
Not every game is able to undergo that sort of heavy amount of testing, however. Open-world games, for example, are just that: open-world, and thus due to the freedom the player is provided, there isn't a way to fully design the game to have a universally smooth difficulty curve. Some players might head for the intended starting village, while others may choose to explore and potentially wander into areas that you wanted to be more dangerous.
One way of ensuring the difficulty is to simply ignore this issue and design the areas of the game in a linear way, despite the fact that it's an open-world game. Players can choose to travel to the harder areas right from the start, certainly, but due to how strong the enemies are, it's next-to-impossible for new players to truly progress in those areas, thus forcing them to head to the area you wanted new players to go. This solution works, but it results in a game at odds with itself, wanting the player to explore freely in an open world while simultaneously blocking players from exploring until they're powerful enough to defeat the monsters within.
Another solution is to utilize level-scaling, a system that, in a way, ignores the issue entirely while solving it at the same time.
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No, no, not that kind of level scale.
The way level-scaling works is that when your character levels up and grows more powerful, in one way or another, the entire game world will level up with you. In theory, as you continue to explore the world, go dungeoneering and discovering useful treasures or equipment, buying and selling things, and doing quests, you will continue to fight enemies that provide a challenge, instead of getting a quest that brings you to an early area where everything is easy to fight and there isn't any sort of difficulty. Depending on the other parts of the game, this can manifest in a number of ways.
In an RPG where you level up by gaining experience points, then getting a handful of points to put into your statistics, like Strength, Dexterity and whatnot, how easy or hard the game is will mainly depend on your ability to strategize, affected somewhat by what stats you choose to increase. If you play as a warrior character, and you focus on increasing your magic-related stats each time you gain enough experience points to level up, you will probably have a harder time than if you focused on your speed, strength and endurance.
On the flipside, if you have an RPG where you level up by increasing skills through use rather than gaining experience points (think of The Elder Scrolls), the difficulty comes from what skills you choose to focus on increasing, affected somewhat by what you actually choose to do in the game. You can level up by playing a warrior and focusing on combat skills, or you could stay in town all day, gather ingredients and such, leveling up simply by increasing speech and crafting.
Of course, up above, I said “in theory”. Level scaling, like everything else related to game design, is fickle, and when it goes right, it can work quite well... but when it goes wrong, it's possible for its implementation to be very, very poor.
One very infamous example of a poorly-done level-scaling system is The Elder Scrolls IV: Oblivion.
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Oh, did you get to level 20 by increasing your Alchemy, Speechcraft, Mercantile, Illusion magic, and all those other non-combat skills? Too bad! You get Minotaurs anyway.
Oblivion's problems stem from a mixture of issues carried over from its predecessor, Morrowind. Morrowind also included level-scaling to a degree, but it was much less noticeable (and was also much more enjoyable as a result). Oblivion included a much higher degree of level-scaling, implementing it not just in terms of the enemies you would face, but also in terms of the randomly-picked loot you could find, different versions of a quest's reward depending on what level you were when you completed the quest, so on and so forth.
Where the problems lie is with the leveling itself. When you increase your class-specialty skills enough to level up, you're able to choose three statistics to increase. The increase is governed by how many times you leveled up a skill related to it: if you are a mage, yet you decided to increase your swordplay ten times for some reason, you would be able to get five extra points in Strength instead of just one. Later in the game, these higher increases became more and more important as the enemies grew tougher and tougher to deal with, and since their major skills and statistics weren't that helpful, it simply became a mess. Oblivion did include a difficulty slider, but due to these issues it often served as a crutch to help players continue playing with their poorly-built characters, and since the game didn't explain its own inner workings well enough, if clearly at all, the game's problems were made very, very obvious.
This ended up encouraging players to either never level their character at all, thus keeping all the enemies at a low, manageable level as well, or to choose a class that wasn't what they planned to focus on, increase the skills they did plan to focus on, and then work on their class's major skills whenever they wanted to level up and get some stat boosts. A player who wanted to play a mage, for example, would pick a warrior class, increase their magic skills a fair amount, then play as a warrior for a short while just so they could increase their “major” skills enough to get a level up. If it sounds like a completely backwards system, that's because it is. If you reached level 20, and you weren't able to increase your stats enough thanks to the game's backwards leveling system, then you would be forced to fight the scaling enemies with a weaker character. Even if you managed to increase your sword skill all the way to 100, if you were lacking in the Strength, you would still be in trouble.
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Maybe he's a bandit because despite all that high-end equipment he still can't afford some better pants.
Not just a gameplay issue, the level-scaling in Oblivion also extended to its atmosphere. At high levels, players could fight bandits on the road that would be equipped with incredibly rare or valuable weapons and armor, so valuable that in terms of the game world, the bandits could simply take off their armor, sell it to someone, and end up with more money than they could likely ever make by being a bandit. This wasn't just an immersion-breaker, but also an economy-breaker: instead of rare and valuable glass, ebony, or Daedric items being rare and valuable, you could easily find some bandits in the wilderness wearing some, give them the boot, then take all the loot and sell it off for far more cash than you could ever need.
Another, less wonky version of level-scaling was also used in Wizardry 8, which was released a good half-a-decade before Oblivion.
Wizardry 8, like Wizardry 7 and 6 before it, utilized the series' traditional party system, making a team of six characters to wander around a world, and dungeons, in a first-person perspective. Unlike Oblivion, which was more of an action-RPG open-world game, Wizardry 8 was a far more traditional RPG, not just with the party system, but also including turn-based battles and much more focus on character-building and dungeon-crawling.
Wizardry's level-scaling worked in the ways you might expect: your characters would level up after gaining enough experience points, and with each level you could increase a couple stats, increase a couple skills, and for mages, you could pick a new spell to learn if you wanted to (if nothing caught your eye, you could always save your spell picks for next time). Your party's average level determined what enemies you would face, but since the positioning of your characters was important in battle, strength wasn't always everything. This became most apparent once leaving the tutorial dungeon, as enemies on the overworld were often spawned in larger groups, ranging from five or six enemies to possibly fourteen foes, or even more.
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Since Wizardry 8 functions more as an RPG than an action-RPG (like Oblivion), these big groups of enemies can often inflict status effects on you, too! Fun!
The problem with this is similar to Oblivion's, in that if your characters were built poorly, or your stats weren't well-focused or your skills weren't chosen smartly, you would often be too overwhelmed to continue. Unlike Oblivion, Wizardry 8's leveling system was much, much more logical and intuitive, but like Oblivion, it still didn't provide enough clear information and explanation to ease new players in well enough.
Of course, what that meant was that a player playing on Novice could easily make some characters that worked alright at the start of the game, but would quickly become overwhelmed during the middle, thus making that need to restart with new characters much more harmful. If a player's team was around level 10 or 12, with quite a lot of hours already invested into it, and then the player realized that they had messed up badly and needed to start from scratch, the realization could be enough to push the player away from playing the game, at least for some time.
Despite how negative the examples I've given have been, this isn't to say that level-scaling is an inherently bad system, because it's not. Wizardry 8 actually does it quite well, and the problem more comes from a potential newbie's lack of know-how rather than the system itself. The point is that level-scaling is a design choice that requires a very careful set of hands and a great deal of focus and understanding to get right.
With all that said, here are some things to think about when implementing a level-scaling system into a game.
If the game devs have gotten so used to their own skill and testing of the game that they've made the game difficult for themselves – instead of difficult for the main group of consumers – then it's likely that the project will need to undergo a large shift. The levels may need to be tweaked or even overhauled outright, in order to make sure that the game has a proper, smoother difficulty curve.
Not every game is able to undergo that sort of heavy amount of testing, however. Open-world games, for example, are just that: open-world, and thus due to the freedom the player is provided, there isn't a way to fully design the game to have a universally smooth difficulty curve. Some players might head for the intended starting village, while others may choose to explore and potentially wander into areas that you wanted to be more dangerous.
One way of ensuring the difficulty is to simply ignore this issue and design the areas of the game in a linear way, despite the fact that it's an open-world game. Players can choose to travel to the harder areas right from the start, certainly, but due to how strong the enemies are, it's next-to-impossible for new players to truly progress in those areas, thus forcing them to head to the area you wanted new players to go. This solution works, but it results in a game at odds with itself, wanting the player to explore freely in an open world while simultaneously blocking players from exploring until they're powerful enough to defeat the monsters within.
Another solution is to utilize level-scaling, a system that, in a way, ignores the issue entirely while solving it at the same time.

No, no, not that kind of level scale.
The way level-scaling works is that when your character levels up and grows more powerful, in one way or another, the entire game world will level up with you. In theory, as you continue to explore the world, go dungeoneering and discovering useful treasures or equipment, buying and selling things, and doing quests, you will continue to fight enemies that provide a challenge, instead of getting a quest that brings you to an early area where everything is easy to fight and there isn't any sort of difficulty. Depending on the other parts of the game, this can manifest in a number of ways.
In an RPG where you level up by gaining experience points, then getting a handful of points to put into your statistics, like Strength, Dexterity and whatnot, how easy or hard the game is will mainly depend on your ability to strategize, affected somewhat by what stats you choose to increase. If you play as a warrior character, and you focus on increasing your magic-related stats each time you gain enough experience points to level up, you will probably have a harder time than if you focused on your speed, strength and endurance.
On the flipside, if you have an RPG where you level up by increasing skills through use rather than gaining experience points (think of The Elder Scrolls), the difficulty comes from what skills you choose to focus on increasing, affected somewhat by what you actually choose to do in the game. You can level up by playing a warrior and focusing on combat skills, or you could stay in town all day, gather ingredients and such, leveling up simply by increasing speech and crafting.
Of course, up above, I said “in theory”. Level scaling, like everything else related to game design, is fickle, and when it goes right, it can work quite well... but when it goes wrong, it's possible for its implementation to be very, very poor.
One very infamous example of a poorly-done level-scaling system is The Elder Scrolls IV: Oblivion.

Oh, did you get to level 20 by increasing your Alchemy, Speechcraft, Mercantile, Illusion magic, and all those other non-combat skills? Too bad! You get Minotaurs anyway.
Oblivion's problems stem from a mixture of issues carried over from its predecessor, Morrowind. Morrowind also included level-scaling to a degree, but it was much less noticeable (and was also much more enjoyable as a result). Oblivion included a much higher degree of level-scaling, implementing it not just in terms of the enemies you would face, but also in terms of the randomly-picked loot you could find, different versions of a quest's reward depending on what level you were when you completed the quest, so on and so forth.
Where the problems lie is with the leveling itself. When you increase your class-specialty skills enough to level up, you're able to choose three statistics to increase. The increase is governed by how many times you leveled up a skill related to it: if you are a mage, yet you decided to increase your swordplay ten times for some reason, you would be able to get five extra points in Strength instead of just one. Later in the game, these higher increases became more and more important as the enemies grew tougher and tougher to deal with, and since their major skills and statistics weren't that helpful, it simply became a mess. Oblivion did include a difficulty slider, but due to these issues it often served as a crutch to help players continue playing with their poorly-built characters, and since the game didn't explain its own inner workings well enough, if clearly at all, the game's problems were made very, very obvious.
This ended up encouraging players to either never level their character at all, thus keeping all the enemies at a low, manageable level as well, or to choose a class that wasn't what they planned to focus on, increase the skills they did plan to focus on, and then work on their class's major skills whenever they wanted to level up and get some stat boosts. A player who wanted to play a mage, for example, would pick a warrior class, increase their magic skills a fair amount, then play as a warrior for a short while just so they could increase their “major” skills enough to get a level up. If it sounds like a completely backwards system, that's because it is. If you reached level 20, and you weren't able to increase your stats enough thanks to the game's backwards leveling system, then you would be forced to fight the scaling enemies with a weaker character. Even if you managed to increase your sword skill all the way to 100, if you were lacking in the Strength, you would still be in trouble.

Maybe he's a bandit because despite all that high-end equipment he still can't afford some better pants.
Not just a gameplay issue, the level-scaling in Oblivion also extended to its atmosphere. At high levels, players could fight bandits on the road that would be equipped with incredibly rare or valuable weapons and armor, so valuable that in terms of the game world, the bandits could simply take off their armor, sell it to someone, and end up with more money than they could likely ever make by being a bandit. This wasn't just an immersion-breaker, but also an economy-breaker: instead of rare and valuable glass, ebony, or Daedric items being rare and valuable, you could easily find some bandits in the wilderness wearing some, give them the boot, then take all the loot and sell it off for far more cash than you could ever need.
Another, less wonky version of level-scaling was also used in Wizardry 8, which was released a good half-a-decade before Oblivion.
Wizardry 8, like Wizardry 7 and 6 before it, utilized the series' traditional party system, making a team of six characters to wander around a world, and dungeons, in a first-person perspective. Unlike Oblivion, which was more of an action-RPG open-world game, Wizardry 8 was a far more traditional RPG, not just with the party system, but also including turn-based battles and much more focus on character-building and dungeon-crawling.
Wizardry's level-scaling worked in the ways you might expect: your characters would level up after gaining enough experience points, and with each level you could increase a couple stats, increase a couple skills, and for mages, you could pick a new spell to learn if you wanted to (if nothing caught your eye, you could always save your spell picks for next time). Your party's average level determined what enemies you would face, but since the positioning of your characters was important in battle, strength wasn't always everything. This became most apparent once leaving the tutorial dungeon, as enemies on the overworld were often spawned in larger groups, ranging from five or six enemies to possibly fourteen foes, or even more.

Since Wizardry 8 functions more as an RPG than an action-RPG (like Oblivion), these big groups of enemies can often inflict status effects on you, too! Fun!
The problem with this is similar to Oblivion's, in that if your characters were built poorly, or your stats weren't well-focused or your skills weren't chosen smartly, you would often be too overwhelmed to continue. Unlike Oblivion, Wizardry 8's leveling system was much, much more logical and intuitive, but like Oblivion, it still didn't provide enough clear information and explanation to ease new players in well enough.
Of course, what that meant was that a player playing on Novice could easily make some characters that worked alright at the start of the game, but would quickly become overwhelmed during the middle, thus making that need to restart with new characters much more harmful. If a player's team was around level 10 or 12, with quite a lot of hours already invested into it, and then the player realized that they had messed up badly and needed to start from scratch, the realization could be enough to push the player away from playing the game, at least for some time.
Despite how negative the examples I've given have been, this isn't to say that level-scaling is an inherently bad system, because it's not. Wizardry 8 actually does it quite well, and the problem more comes from a potential newbie's lack of know-how rather than the system itself. The point is that level-scaling is a design choice that requires a very careful set of hands and a great deal of focus and understanding to get right.
With all that said, here are some things to think about when implementing a level-scaling system into a game.
- If your game has enemies that can give characters status effects, how will you design the level-scaling system to make this fairer all around? If a somewhat-poorly-built character is blinded by an enemy and has no skills or magic to deal with it due to the poor build, what can you do to even things out? Statuses could wear off after some time, for example, or you could group statuses into tiers, with potions to cure all low-tier status effects, ones for mid- and high-tier, so on and so forth.
- How do a player's character, or characters, level up in the game, and what effect does the level up have on them? Do they level up by using skills, and each level lets you increase stats? Do they level up by gaining experience points, and you can use this to increase their proficiency in skills? Level-scaling needs to have synergy with the actual leveling system, so study the way your game uses leveling and then think of how scaling would work in tandem.
- Perhaps most importantly, how will you have the game help new players learn and understand the leveling system, and how will that affect the worth of the level-scaling? Will you include little blurbs of information for the stats, skills and things accessible at any time? Will you give players a brief yet succinct explanation at the start, discussing ways to start? It's easy to simply type out huge detailed explanations and then put them in a game's manual, but many players, especially in recent times, are more likely to jump into the game itself rather than peruse a manual. Perhaps, as discussed in the article on tutorials, you could implement a tutorial that experienced players could turn off?