It depends on the game. Pretty sure we discussed this a while back around Uncharted, with talk about the AI becoming harder in harder difficulties, and that's definitely doable. Feel the same was said about KZ2. From a developer perspective, it's easy to pad out AI with errors and delays to make it simpler, while the algorithms used for aim etc. are perfect so at absolutely difficulty, AI would be unstoppable. Which was another point we talked ab out - we want AI to be limited as there's no way one hero could successfully take on 100 trained combatants unless those trained combatants are severely handicapped.
Bullet sponges and glass protagonists are reasonable parameters. They aren't doing a lot but it changes up the choices the player needs make. This goes back to DnD in the 70s - how else do you scale difficulty?
You can also increase speed and amount on screen. Completing R-Type on Master System rolled into a game+ mode with way more happening on screen. Needed better reactions, decision making, and faster Drone control.
Lastly there's increased complexity. eg. Elemental resistances which can be negligible in low difficulty but fundamental in higher difficulties.
