I am planning to write a series of posts on how game design elements have changed from 1999 to today. I'll mainly compare the original Everquest with World of Warcraft, as these two games both had a dominant market share in their time. I will try to discuss what changed from EQ to WoW, and more importantly *why* it changed. The first part of this series is about death penalties, how games punish you when your avatar gets killed.
First of all it has to be said that a penalty for dying is absolutely necessary. If whenever your character died you just would need to push a button to resurrect with full health and mana, ready to continue the fight, you could beat any monster, and the game would become pointless. To be able to win a game, there must be an option to lose.
What has changed from 1999 to 2006 is the harshness of the death penalty. In Everquest, when you died, you reappeared alive but naked at your bind point. You could only have your bind point in a city, and non-casters weren't even able to set their bind point themselves without the aid of a caster. So potentially the bind point was very far away from the point where you died. You then had to do a so-called "corpse run", running naked from your bind point to where you died, to collect all the items from your body, your armor, your weapons, and all your bags with all the items in them. In addition to this corpse run, you were also punished by losing xp. If you were just fresh into a level, you could even lose a level from dying.
Unsurprisingly, corpse runs were not very popular. The worst case scenario was that you "lost" your corpse, having died in a place where you were unable to retrieve it, thus losing all your equipment and inventory. That did not happen very often, but it was possible. For example from the Erudin newbie zone to the newbie dungeon The Warrens you had to pass over a ledge. If you fell down that ledge you ended up dead at the bottom of a level 50 dungeon, and unless you had some high-level people help you, your body was irretrievably gone. A more common occurrence was that you retrieved your corpse, but died a couple of more times on the way, losing more and more experience points. A bad evening could set you back weeks in experience points.
One notable consequence of the corpse run system was that there were a couple of dungeons where people of the correct level to gain experience there would never go. If you fight your way into the deepest point of a dungeon and your group wipes there, while the monsters behind you have all respawned, you were all in deep trouble. Thus for example the fabled Frenzied Ghoul at the bottom of the Lower Guk dungeon, a level 42 to 44 mob, was never hunted by a group of level 45 to 50 players, who would have gotten xp from him. Instead level 65 players who didn't have any risk dying there camped the Frenzied Ghoul for the Flowing Black Silk Sash, a rare magic item. As dying deep in a dungeon had a real risk of you losing all your equipment, the reward / risk ratio wasn't good enough for dungeoneering. So people played it safe and went hunting in zones where they were sure to be able to get back to their corpses if they died.
Since Everquest death penalties have become less harsh. Corpse runs where the first thing to be eliminated from MMORPG game design. But also the experience point penalty changed: You lost less experience point for dying, then games started to introduce a xp debt instead of a loss of xp, so you couldn't lose levels any more, and finally World of Warcraft eliminated the xp penalty totally. One game erred on the side of having a too lenient death penalty, Star Wars Galaxies, where people found that committing suicide and repairing the death penalty damage was often faster than running back to the city. World of Warcraft has a reasonable well balanced death penalty system, where you lose 10% of the durability of your items from dying, and you can walk back as a ghost (that can't be harmed on the way) to recover your corpse, or you can speak to a spirit healer at the graveyard and resurrect there, with all your gear, but with an additional 25% durability loss and 10 minutes resurrection sickness.
In summary, the death penalty of a game is a powerful tool which strongly influences how much risk the players are willing to take. Theoretically you could make a game with permadeath, where when your character dies, you need to roll a new one. Obviously in such a game you would see people not even daring to attack to bunny without a group. Given how many fights you do in a MMORPG, even a 1 in 1000 chance to die would be far too dangerous. In games with corpse runs and lots of xp loss, people will play safe, and avoid getting too many monsters between them and their bind point, which makes dungeon design difficult. At the modern level of death penalty people are willing to be "heroic", as failure isn't too harshly punished. But you can't possibly make the death penalty much lighter than now, because then people would just play foolhardy and not care about dying at all, which then becomes silly.