I agree that design philosophies have deviated away from the often cheap and unfair mechanics of older games, whether they be accidental or intentional, in an attempt to cater to an older and admittedly more casual audience with less free time on their hands. However, I believe there is a right way to go about making games challenging without being cheap or saddling you with blatantly bad design.

Two games that go about this the right way are Dark Souls and Batman: Arkham Asylum. You will die over and over again in the first game, but this creates a huge sense of reward when you succeed. The game also encourages smart equipping and tactics, the latter of which it has in common with Arkham Asylum. I recently beat that game on Hard mode, and I can say that not one of my deaths, barring a strange glitch where I fell through the floor into a void, were due to anything other than my own mistake. To overcome both the main story and the extra challenges, a player needs to be both efficient and intelligent; button mashing will get you nowhere fast.

Now, two examples of poorly done extremes are Call of Duty: World at War and Prince of Persia (2008). In the latter, the game is insultingly easy because you are bailed out every time you are about to die with no real penalty other than possibly missing an achievement/trophy. Because of that, there's no real sense of accomplishment or any real reason to get involved with the game. The former, on the other hand, is notorious for being probably the hardest game in the series for all of the wrong reasons. The AI cheats frequently, the grenade spam is insane, and many levels require you to navigate chaotic situations when nearly every enemy is focusing on you and not your AI companions without being put down, leading to frustration and cheap death after cheap death.