The worst type of penalty for dying in videogames is the option to load a previous game state.
Each game does whatever it feels it should for the purpose of the gameplay, so this is why that for games that try to pull you into the world with lore and world exploration (unnecessary to the main game's completion) as a form of immersion, reloading the game state, as a death penalty, really is the opposite of immersion, and just a waste of my time.
There's very little engagement during the time it takes you to retrace your steps through an area you spent 50 minutes exploring, gathering every single item you could find, pissed off that the you've been set back so much.
Gameplay becomes one of two things upon reloading: one, an attempt at remembering the locations that had the most important items you found, and rushing to those locations, ignoring the rest, as you can't be bothered to spend time to find all the items in the area again. Or two, biting the proverbial bullet and moving through the area, begrudgingly, to gather all items again, spending close to the same amount of time you spent in the first place, cursing everything, in the process.
Then there's the third option. Quitting out the game and not coming back to it for some time, because you've felt cheated.
Neither of these options are what i call engaging.
Enter, BioShock.
BioShock really made an impression on me; the superb underwater atmosphere, the frantic combat that allows you to use multiple systems to deal with enemies such as: using the environmental elements to damage enemies, turning enemies against each other, using plasmids to create a range of elemental damage and other "magics" that help during combat, the weapons, and the combination of all of these, to create said frantic combat.
I could go on about BioShock for the entire day - it's one of, if not favorite games of all time.
But penalty of death is what i'm talking about now, and BioShock did this almost well by using the Vita-Chambers which where scattered around the world. Upon dying you respawned in the nearest Vita-Chamber from where you died. Everything you did up until dying persisted - items found, enemies hp's shaved off, broken windows, etc. The game didn't force you to retrace your steps, ever.
So you never lost the time you have spent discovering secrets and whatnot; the things that are not integral to the advancing of the game's campaign.
Some game have autosaves at certain checkpoints, but what about the time i spent between autosaves, ei, checkpoint?
As great it was not to see your time wasted, especially when doing things that where not required to complete the main campaign, BioShock's respawn system has it's faults.
These are not pertinent to the point i'm making but, as i said, i really enjoyed BioShock so i'll talk about all the tangents. BioShock's respawn system failed to correctly penalize the player for dying. It didn't steal away my exploration time (good!) but it also didn't manage to make dying something you'd want to avoid. This led to the player being able to respawing over and over - remember, without loosing any progress -, near a boss area, hitting the boss guy with a wrench on the head, shaving away 1 HP per death, in this hit-respawn loop, for 10 minutes until he died, with no penalization to the player. Perhaps a few bucks where taken away from my inventory, but nothing worth mentioning, really.
It did some things wrong. It did other things right. And not using previous state loading was something i feel is right.
Another thing i enjoyed, that appeared in all the BiosShock games is that the respawn mechanic was actually something explained within each game's lore. In BioShock 1 and 2, the Vita Chambers where programmed to detect that you died, and simply cloned you. This was programmed by the founder of Rapture, the city in which the game's take place. There's more detail about it if you wanna read it online. In BioShock Infinite, resapwning meant that another "you", from another universe is brought into your current universe (the game dealt with the multiverse in the game's story) with the aid of your NPC companion, bringing you "back to life".
Excellent two things that creates an experience that doesn't expose the crude respawn mechanic (just exit the game and select load game).
Granted, not every game has the luxury of tying respawn to lore.
But, avoiding previous game state loading any game can.
Here's my idea on how:
The Respawn Choice System.
A system that gives the player choices regarding the respawn of his character to try and avoid previous game state loading and avoid BioShock's "no real penalty for dying" pitfall .
Example:
You died.
What do you want to do?
1 - "Respawn near death location. You feel woozy, have 1 HP, and you'll have to find your inventory items in the area.";
2 - "Respawn at death location with 100% health, but with all your inventory stolen." (This can become a side quest where your have to go to the location where your inventory items have been taken too, and try to retrieve them.);
3 - "Respawn way far from where you died, at headquarters, but you can create a duplicate of every inventory item you had and have 100% health and some boost."
4 ... (Possibilities are endless. And quite frankly it depends so much on the game and lore.)
You can dynamically modify the respawn choices, after each death, reducing/increasing values, to try to avoid abuse of a single choice or pattern of choices, or increase the penalty for dying, as the game progresses. As to avoid BioShock's mistake.
All this to drive home that, eliminating the time a player spends in the game (not trying to beat the main mechanics of the game, which is what games just are) by loading a previous game state is a no-no. In my book. And that there are other things that can be used as death penalty!
Postamble
I grew up with games where your character had x amount of lives. Then it was game over and you had to restart the game again, from anew.
But these games where not focused on lore rich worlds, where you go on a tangent for hours and do things that had no impact on the main campaign's completion.
And, even these old games didn't load previous game states upon death. It kept the game state, until you ran out of lives (which is a different system than we use nowadays).
All we did in those game was try and beat the mechanics of the game. Not spend hours exploring huge worlds, looking around and picking things up that did little difference to the completion of the main game. Maybe some did, and if they did load previous game state upon a single death, they shouldn't have!
Because that time we spend exploring the worlds of games, not being tested against the game's mechanics, nor advancing the main game's campaign should not be taken away, ever, with previous game state loads.