Rant

I feel like I should add some advice and a sort of response to KatShot.

To start, balance isn't always a must have for a game. TES games are known for having some really game breaking stuff. The devs know that, and are OK with it.
If a game is multiplayer, it gets tricky, as player will probably be competing with others, so the game may need to be balanced.

KatShot talked about pen & paper RPGs, so I'll talk a bit about it:
On PnP RPGs you have the GSN Theory https://en.wikipedia.org/wiki/GNS_Theory that sort of divides the games into three categories. I'm not going to describe each (check the link) but I'll outline some of the characteristics of each. (I'm not very experienced with PnP RPGs, so there may be some mistakes)

Gamist (DnD): Usually level and class based. Levels provide an easy way to estimate a character's power and class not only limits player choices in developing the character but also in the actions that he may perform. Classes are a good way to balance the game, and to ensure that each character in a party has a specific role (Fighter kills stuff, rogue checks for traps, cleric heals, etc).
Most computer MMOs are like this because a character can't "cover all the bases", so they must team up with character from other classes, and level allows you to see the power of other players and for the game to flag character and enemies as being a, easy or hard challenge.

Simulationist (Gurps): Usually there are no levels, you spend experience points improving skills or buying Traits (aka Perks, Feats, etc.). These game have rules for almost everything, and you can BE everything. There are no restrictions. You can be an half-dwarf half-sprite cyborg jet pilot with telekinesis. There is big choice in how to develop your character.
Applying this to computer games is tricky for two reasons: The amount of choices may be too much for the players, and it's really easy to have game breaking combos.

Narrativist (Fate, kinda): Usually light on the rules, it's all about the story. There are not many dice rolls, there may not be any combat. Character creation and development is limited and abstract (not many attributes, no skills, some stats may be sentences created by the player, etc).
In computer games... kinda hard. The only games I can say that approach narrativist games is Role playing in Second Life and Sleep is Death by Jason Rohrer, and they'ra not actually *games*.


With this said, each serves a purpose. A game like WoW where the main focus is killing monsters and players, and getting better loot, makes sense to have "Gamist" features. A game like Eve Online, where the whole game is run by the players, with a lot of choices is activities (there are player who are mercenaries, others that are corporation managers, others that are miners, etc), "simulationist" features are better. Notice that balance is not important in Eve. Not everybody is playing for the same purpose, and the flexible nature of the game allows for some changes in the dominant strategy without developer intervention.

In my opinion, I like TES and UO like systems in single player games, as it allows me to be anything I want, do everything I want. In MMOs, a class bases system is better, unless you're going the Eve Online road.

For more information on rpg mechanics I recommend you to check out Design Patterns of Successful Role-Playing Games http://rpg-design-patterns.speedykitty.com/doku.php