You rarely fight more than 2 opponents at once.
In terms of difficulty scaling, the game does two things when you move that slider:
- Increases/Decreases the AC of your enemies
- Increases/Decreases the damage of your enemies attacks
IMO, this is a terrible method of controlling difficulty, at least in this type of game. You're still only going to be in more 1 on 1 situations (2 on 1 if you have a follower) and it can become quite easy for many players; it just becomes more time consuming. Or it can be frustrating to not-so-skilled players who are getting killed in a single blow very often.
In a game like this, where there is more focus on close quarter fights, a better way to scale difficulty is by increasing the spawn rate. More enemies fighting you at once. You could also couple it with a toned down version of the two items above to make it even more challenging. It would be especially nice to have larger crowds for the AOE spells in the game. I've been saving all these Mass Paralysis scrolls and I have not yet needed to use one, because the most enemies I am fighting in a single room/area is only about 2 or 3, and they are only ever the weakest types of mobs that are felled in a single hit. Even in some of the Draugr infested crypts, where you end up fighting about 15 guys in one room, they only come out 2-3 at a time and never en masse.