What are some examples of games that do this? I haven't played many recent titles, so the only examples of this I can think of are some games like skyrim that let you max out everything so you can play as any class you like and move between them at will or Final Fantasy/Pokemon where you can grind your way to victory if you're willing to spend the hours.
I'm pretty sure I've played a title or two that tried to automatically adjust the difficulty according to how well I'm playing, but I always resented it. It feels like punishing success and it's too easy to game by intentionally holding yourself back.
I think options/settings still have their place. There have been several times when I (as a relatively non-disabled person) would have loved an option to disable a time limit or lower the difficultly level of a boss fight and there are games I've started but never finished because I couldn't. Cheat codes have really fallen out of favor, but they had their place too.