Games must be fun. An easy game is fun to begginers. A tough game is fun for experts. A good game is fun for everyone.

Imagine a horisontal line across the screen. People below the line lose, and people above the line win. People on the bottom of the screen give up, and people on the top of the screen get bored. Your game, must push everyone ontop of that line.

Difficulty level is one classic way of being fun for everyone. Though, how can a player know, what difficulty he/she needs? The perfect solution to this, is to allow the player to change difficulty, mid game.

Progressive levels can do the trick, though it isn't too favorable. If you have a story line, and a player gets stuck at a certain point, and gives up, they never get to see the super fantastic end you've created. (My one and only upload directly goes against this advice.)

Mario cart has used another great technique. The player coming last collects better items, than the player coming first. This allows alot of overtaking. It's the overtaking that's fun for everyone. A race with the winner constantly winning, and the loser constantly losing is a dull one.

Pokemon made it, so that everyone gains experience points, win or lose. So even if you are pushing buttons at random, you'll still progress. Yet pokemon masters, will be able to advance on to the more challanging levels, even though the pokemon hasn't experienced enough to be much good. Making it a tougher challange for them. The expert would finnish the game by the skin of thier teeth, and the random button pusher would pass it in flying colours. It's giving people those reverse experiences, that makes a game great.
Games using similar techniques are Sim Copter, Final Fantasy X (I havn't played any others,) and Black and White (As far as I've played anyway. Though I hear it gets nasty in levels I havn't yet reached.)

Doing this adds to the playability of the game. This is why I hated racing games. If you stuff up, you get a cheaper car, therefore a smaller chance of winning in future, AND you get no chance to redeem yourself unless you save the game, or restart it. That way, the experts get EVEN MORE bored, and the players get EVEN MORE frustrated.