The Total Party Kill is a phrase I learned only recently. I have experienced this on World of Warcraft (quiet a few times, sadly). This happens in the Fallout series all the time. In Pencil and Paper RPGs, the TPK event was considered among my peers as undesirable and generally anti-fun. We preferred to achieve the imaginary mission objectives and reap the fantasy rewards for pretend glory.
In old school D&D, characters can be killed very, very easily. Until your PC got to about fifth level, you were always about one ambush/pit trap/fire ball away from death. That is much of the charm of the game. It's also why I prefer some slight intervention by the DM on behalf of the party -- at least during the PC's low levels.
However, mid-level PCs are on their own. If one decides to drunkly urinate on a sleeping dragon, I will be happy to bring the pain as the DM.
I think D&D plays better with low-level characters. The challenge is greater and so is the verisimilitude. Should the occasion obtain, I will encourage my players to retire their PCs at 9th or 10th level (that is, build a stronghold, settle down, get out of adventuring). Time to roll up a batch of PCs and do it again.
From what I read, some of the newer additions of D&D (that is, published after 1981) seem to be considered with "balance." I guess that must be fun for someone.
If you're into such things, I have a command-line perl script that generates PCs pretty quickly and uploads them to a Google spreadsheet. You can play with it here
And now, the Carrion Crawler, er, Carcass Scavenger:
