Many gamers don't like how 'easy' games are today. I don't feel it, because what I feel about old games is that they were very unfair, with sudden deaths that you could not avoid, made just to force you to put one more quarter in the machine. Sure, games today don't feel as challenging, but to someone like me who don't play games for the challenge, I don't mind games with easier difficulty.
In old games, death was a severe punishment. You would either have to start the level at the beginning at best, or all the game at worst. And this can be very frustrating. Gamers with lesser skill or just don't interested in brag with their friend about how they finished that hard game would be put off by games so punishing to the tiniest mistake.
Today, with checkpoints and save anywhere features, death to the main player is an annoyance. Sure, gamers with no skill still will have trouble finishing games, but they will at least have a better chance at it. And instead of being forced to restart the game because your parents/girlfriend/boyfriend/cat interrupted you, you can just start from five minutes ago.
It does not mean that death can't have its weight in the game, but instead of being a punishing tool, it can be used as story device. Instead of the player dying and dying, what about taking the life of a precious NPC, whose players come to love?
One of the reasons Aerith's death at Final Fantasy VII is so remembered today is because many players loved her as a character and saw she die with nothing they could do. It was over. And many games can use this as a way of storytelling. The Darkness use the death of a beloved one as a driving force for the main character. Other games punish you with the death of a beloved character by the choices you made, like Mass Effect.
In the end, death can be an important aspect of any game. But I don't think we will ever see games come back to it as a punishing tool against unskilled players.