Many of the discussions around how to play seem to be centered around who gets power to define what in the setting and story. I'm going to try my hand at analyzing the balance of power between the different actors in a game. You'll have to excuse me if this seems clumsy or unoriginal. I'm not writing in my own language, and am a total noob at writing out RPG theory. Still, it seems useful to sort things out and get a clear view of one's options before taking a stand in regards to what style one wants to use. This is my attempt at such a clarification.
The way I see it, there are five power factors in a typical game: The GM, the players, the system, the characters and chance
The players: Traditionally holds power only over their own actions, while the system and the GM determine the outcome of those actions. In some newer systems, the players are given control of certain elements that would normally be outside their characters control. This includes systems that give players certain resources that let them favorably influence die rolls or directly change things in the game world.
The GM: The GM normally controls the actions of all characters who are not controlled by the players. He is also the referee who decides on how the rules are to be interpreted and if certain rules should be left out or added. He also decides the outcome of actions that are not handled by the system.
The system: The system is the main balancing factor that decides who gets power over what. It also decides how the different actors may use their power in-game.
The Character: Through their character sheets, the in-game characters themselves are actually given a certain amount of power. This indeed applies to anything that has stats in a game, not just characters, but I'll call them characters for simplicities sake. When a character has a score in some ability, that gives the character himself some measure of control over how the other actors may control what happens to him. This most commonly pertains to die rolls, but some systems also has rules on how to roleplay a character based on stats. And even when there are no such rules, most players will let stats influence their roleplaying in some ways. This point also includes the discussion on player knowledge vs. character knowledge, which seems to be a basic issue in the OSR.
Chance: At certain points in the game, the GM delegates his power over the outcomes of actions to chance. When this happens is to some extent dictated by the system, but often the GM must make a ruling on whether let chance decide the outcome or whether he should decide for himself what happens.
Deciding on the balance of power has a profound effect on how you play the game. The newer "narrativist" games for example, tend to give the players a lot of power to define the story, and some of them removes chance as a factor entirely. The reasons for this is an argument that this mode of play encourages telling of stories as opposed to playing a game.
Eliminating chance gives the sentient participants in the projects more control to determine the flow of the story, essentially making it more their own creation. Giving the players more power relative to the GM and the system seems to be motivated by the idea that more heads generate more ideas than one, and the feeling that freedom from restraints lets the imagination work easier.
To me, the argument for keeping chance in the game is the feeling of excitement it provides. Not knowing what is going to happen is close to being a definition of what excitement is all about. You could say that if the GM decides what's going to happen, the player still would not know, but a GM is a person who could be influenced by social interactions and so the outcome would be less unpredictable. This could be taken further and made into an argument for why the GM shouldn't fudge die rolls, but I won't go into that at this point.
I think the same argument could be made towards limiting power to the players. It intensifies the excitement created by chance. There is a certain quality to being left to ones own in the face of chance that invokes a feeling of the sublime in a game, making it grittier and more "realistic". And when I say realistic, I mean that as an aestethic quality and not as having anything to do with actual reality. It is more the feeling of actually being there, or immersion if you like, than being in fact like reality itself.
Chracter power is an interesting subject. How much should the stats on your character sheet influence play? This is not just a question of whether to let your alignment dictate how you play your character. It is also a question of which abilities to include in your game and how to handle those abilities. When should a skill roll be used, and when should the players skill instead be tested? Should a player be allowed to use knowledge that he has but his character does not?
This may be the most challenging topic I have encountered through being exposed to the OSR. Especially the first question seems hard to answer. The second is easier, as it seems to me artificial and contrived to demand that a person overlook it's own knowledge while playing. I think part of my reason for writing this entire post was indeed an effort to come closer to an answer to the first question, though it seems it has not helped.
Seems I will have to do some more thinking on this subject.