
The video game industry has experienced a tremendous level of growth in the past few years. Video games and gaming related media are being marketed to and enjoyed by new segments of the population. And by new segments I mean people besides the stereotypical closet nerd with a computer science / art major and affinity to metal music and fantasy novels.
Everyone is a gamer now, even your mother.
As far as the industry is concerned, your little cousin playing Farmville is just as much of a gamer as you are. She is a new segment of gamer, as well as the hardcore gamer, and the people who play apps on their mobile phones to kill spare time are another. They are being intelligently targeted by companies and developers, though not with the same kind of game or gameplay. You might not agree that FarmVille is a real game, but business strategies like FarmVille and it's developer Zinga have undeniably helped the industry grow. They have helped gaming and the psychology behind it become a part of our culture.
To reach these new segments, game developers and marketers have used several tactics. One of the more obvious ones is the "dumbing down" of the skill curves required to play a game properly. Not everyone is a "hardcore gamer" willing to burn days in front of the computer, and the people responsible for creating games are aware of this. Hardcore gamers have fun with games that are very challenging, but if there's proportionately less games like that being produced,
What is a hardcore gamer to do? You add your own Challenge to the game! There's several ways to do this, but there's two specific ones we're going to be discussing here. The first one is altering the game yourself to make it more difficult and challenging. The second is to create rules for yourself that will make the game challenge you in new ways. This form of rule-bending is called a "Challenge", where you challenge yourself to complete the game under a new, player-made set of rules.
This concept is very popular in all genres of games, and there's several ways to do it:

An attempt to finish a game from start to finish in the fastest time possible, using any means necessary to speed things up.
There's entire communities and websites dedicated to documenting these and checking their validity, such as Speed Demos Archive:


Beating a game while also limiting the options available to the player, such as not using a set of abilities or never accessing a game-play feature.

A Priest Single Class Challenge in Final Fantasy Tactics.
Only the abilities of the "Priest" job are allowed in this challenge.
Screenshot added by Zaen

Beating a game that has had it's game-play mechanics altered to be more challenging or to provide more complex game-play.

Median XL by BrotherLaz. A very successful Mod of Diablo 2: Lord of Destruction by Blizzard Entertainment.

Some independent, home-brew games are made to be exceedingly difficult.
Some of them are direct responses to the increasing number of easy to play games in the game market.

I Wanna Be The Guy, a VERY popular and VERY difficult Independent Game made by Kayin.
It is often criticized of being challenging in unfair ways.
Gaming challenges can help bring a certain feeling of accomplishment for those who are extremely passionate about games. They can also breathe new life into video games of the past, or games which have lore and writing you love but possess a less than desireable level of challenge. Gaming challenges let gamers take an active part in creating user experiences for themselves and the rest of the world.
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