Lower difficulty accommodates a broader range of playstyles and options. Higher difficulty increasingly demands optimization and can make every fight a puzzle boss.
There are more and less effective ways of accomplishing goals in games. For many people, theorycrafting and metagaming are the game, and the real fun comes from figuring out how to manipulate rules and situations for optimal effectiveness. There is a lot to be said for this approach to fun. If you enjoy strategy games, this is probably what you enjoy. Wringing the most value out of every move and option is the heart of strategy gaming.
Many care less about that. They have concepts they want to play, toys they want to use, or “I’m just here to have fun.” It does not matter if the flamethrower is 20% less effective per point than the shotgun; they just want to watch the world burn. At an extreme, there are those who love the difficulty of execution, and they will intentiontally make suboptimal choices to prove they can succeed under those conditions.
High levels of difficulty tend to restrict the range of viable options. In easy fights, like solo MMO play, a silly concept build works just fine, and a perfectly optimized build just saves a little time. As difficulty increases, the number of viable builds narrows (given constant player skill). Difficulty gets tuned this way: playing at the highest difficulty, you may need great execution and a great strategy and an optimized build. If not, the highest difficulty could be made even harder.
The Queen’s Gauntlet in Guild Wars 2 was a good example. You could sleepwalk through most of the fights with an optimized mesmer, and I’m told that warriors were also strong. Other classes needed to struggle and adapt more. Stronger classes and builds could keep their usual skills and talents; some people needed to switch up weapons and abilities to beat some bosses. More skilled players could do more with less, but the DPS check (X hit points, Y seconds to defeat it) limited that.
You can also optimize fun and silly builds to make them viable at higher difficulties or use optimized builds for casual play to compensate for unoptimized playstyles (inexperienced, lazy, drunk, limited physical capabilities). One of the joys of character optimization in Dungeons and Dragons 3.5 was seeing experts take mechanically weak ideas and make them viable characters rather than burdens that needed to be carried by the rest of the party. “We swapped some feats on your whip-wielding halfling cleric, and if you take these spells, you should be back up to par.” The car looks the same on the outside, but because it is souped up under the hood, it handles better when conditions get rough.