Good point, what ARE the clear differences between old and new school. Old School is a genre in itself, not merely a style of character and area design. Here's my definition:-

Old School is generally a type of RPG set in a Anime style european fantasy setting. Most RPG's people think of as "Old School" fit into this category. Of course, there are exceptions such as FF6, but generally, my definition applies. Such games include FF's 1-5 and Breath of Fire's 1&2 and possibly 3&4 cause it's done in the same style. Old School RPG's are often less forgiving on the player, as they often give you fights to remember (A good thing in my book). By comparison, most "New School" RPG's are way too easy, even FF10.

As for New School games, they tend to consist of a different kind of setting to many RPG's of the "Old School" genre and are often appear highly destinctive. Games like FFVII, FF's X-X2, Breath of Fire-Dragon Quater and the .hack games fit into this category. Developers seem overly concerned about not using ideas which have been popular many times before in case people cry "rehash!". The downside with New School that visuals often overshadow actual quality on occasion and these games are often way too easy, such as FFVIII and X-2.

Now, I'm not saying that old school RPG's are unoriginal, not at all. The Breath of Fire games are a highly creative idea. There were probably dozens of RPG fans out there who wanted to play as a dragon before then. Also, on that note, it's the characters that make the story more than the setting. Sure, setting counts for a lot, but the stories obviously focus the characters first. You can have the most distictive and creative setting imaginable but still have a derivitive storyline if the characters are unoriginal.

Maybe the reason Old School can be easily defined as mostly RPG's focusing on medieval european anime fantasy is cause those kinds of setting were (and still are) popular in Japan. Plenty of people use these kinds of settings, even now. Square don't seem to give themselves enough credit over FFIX, simply thinking they've rehashed old material when this isn't the case. Besides, a setting can be reminicent of medieval europe without being unoriginal. Look at Breath of Fire III and FFIX to see what I mean.

Anyway, that's my definition. I'm interested to hear what others think on the subject.