This has been discussed on The Forge before, but I wanted to give some flesh to my own thoughts on this subject..
When folks sit down to play a Role Playing Game, at least 9 times out of 10, it is with the expectation that the character they're playing will live. Paranoia is an obvious exception to this rule, and depending on the group, Cthulhu might be as well. But for many players, and in many systems, creating a character is a process into which one devotes a little time and energy to create an "avatar" if you will, through which they interact with the game universe.
The avatar of course takes many forms, even in the same game environment. Take a D&D game, if the players have made some thoughtful decisions in picking classes, then they have already made statements about how they want to interact with the game world. Warriors want to hit things, sneaky thieves want to break into things, etc etc. These are generalizations of course, but still, it implies something about the way the player wants to play. Let me put it this way, a party comprised entirely of orc barbarians and war-mages is probably not interested in a story filled with intrigue, politics, and cat-burglary.
(Eep, I'm drifting, back on target)
So this avatar that you have spent between none and alot of time creating is your mechanism for interacting with the game world. Here's what I'm getting at - lets assume you've created a character and played him/her for a few sessions, and things are going well. You've gained some levels/bought some advances, you're refining the character both mechanically and role playing to the way that you want to play him. Then a troll eats you. Please create another character.
This happened to me in a D&D game a year or two ago. I was pretty disappointed, and less than excited about dropping the character that I was having a GREAT time playing, and coming up with something else. Now don't get me wrong, I'm not trying to say that ingame consequences should be done away with, not at all. But actually what I am trying to say is that I think they should be done in a different way. I think that there should only be two ways in which you will removed from your character, and that should be through role playing or through stakes agreement. "I take my glove off and smack the Grand-Swordsmaster-with-a-quick-fuze-who-just-killed-someone-for-spitting-in-his-direction." This is a silly example, but what I mean is through choices that are obviously taking you down a dark dark dark path, you could die. Vampire games come to mind. Do not fuck with the prince. At least, not unless you are awfully well supported. And by stakes agreement, I mean that it should be set out beforehand that you might die here. Sure, killing orcs in D&D is assumed to have some risk, but we also assume we'll survive, because we're the heros.
Anyway, gotta work. more later.