In my opinion. some difficulty settings in many games these days are stupid.
Making enemies hit for more damage or have more HP doesn't make it harder... it makes it more annoying. And cheating.
Civilizations series can't make enemies smarter, so they just flat out give them more Production/Food/Research bonus to them instead.
To me, higher difficulty means enemies are more intelligent. Maybe they know how to flank/ambush you. Maybe they have more abilities to use. Or maybe more enemies (archers behind swordsmen, ie.)
Rather than have functionality that only occurs at higher difficulty settings, I propose changing the percentage chance that a unit will do something smart. Halo, for example, at harder difficulty settings, the chances that a enemy will roll out of the way of an incoming grenade is higher.
They also muck with health/shields, which, I think can be done without too much aggravation, but it depends on the setting of the game, and how much health one is talking about. A WWII shooter, where it suddenly requires five headshots to the face to kill an enemy, really is aggravating and feels more like cheating. That enemy robot, alien, or shielded ship, tends not to bother me, to a point, if it's not scaled up to the point where it becomes a chore, because the AI is still stupid and easy to beat, but just takes longer, than the scaling doesn't work.
Of course, the same goes with scaling reaction times and whatnot, if the enemies become omniscient, then it feels more like the AI is cheating. If on the other hand, they are just more likely to use their grenades if they have them, it's less of a problem.