I think it doesn't effect your character because you can alter the difficulty in mid game.
I'm pretty sure that it makes the bad guys have more health, take less damage, do more damage, flinch less, harder to hit, hit better, make you flinch .... it makes them harder allaround. <img src="/ubbthreads/images/graemlins/winkwink.gif" alt="" />
Killerzzz
