So I'm at level 40 on whatever the 'normal' setting is, and I'm thinking of setting it higher to make for more of a challenge, as I've gotten to the point that I can drop a Deathlord in a few hits.

What will going to Expert or Master actually 'do'?

Are enemies going to inflict more damage, have more magicka/stamina, or are they just 'bullet sponges' as somebody has stated?

As far as I can tell enemy damage is the same, but they soak up more of your damage.

This is a good question. I was looking for a precise answer myself. I couldn't find it on the wiki yet.

In Oblivion the slide just made enemy attack more powerful, and your attacks less powerful. With 100% difficult your attacks dealt on sixth the damage and normal and enemies hit six times harder than on normal.

But I wonder how much the variance is in Skyrim, and whether the difficulty level does anything else. For example in Fallout 3 the difficulty also affected experience points.

Does anyone know for sure?

Or can anyone who has played on multiple difficulty levels give impressions. For example, is Master level a whole lot harder than Adept or Expert, or is it just a small variation?

I was hoping the higher the difficulty level the better the loot or at least cash from enemies. Alas...

I played 45 some hours on Master, from beginning to about level 36ish. It was really, really hard. I was a sword and board Nord in heavy armor, a straight up tank spec. What I noticed is the loot is actually worse than on Adept, and potions are very few and far between. In fact in order to survive I truly had to rely on the smith/enchant exploits to really enjoy the challenge and survive.
Also I found on master that Snow Bears are actually Nord gods that are unbeatable, way tougher than ANY dragon I had faced. Haha, a little broken if you ask me. I finally took it off master because it was too frustrating. I'm more into the game for the exploration and lore, than actual hardcoe combat. That's all I have to contribute, don't know any technical specifics, just my personal experience.

I played the game at Adept to start. Around 15 I changed it to Expert, then around 30 I changed it to Master. As far as I can tell, the mobs do hit harder and they have more hp. But I did notice that they were smarter as well. They blocked more often, they attacked when I was vulnerable. They would stop swinging when I went to block. I also had problems with mobs dodging magic attack. As I have seen this behavior at adept as well, I assume it just makes it more common. I have also been insta-killed by Bandit Marauder decapitations on Master and not on the other difficulties. In summary, I would say that the regular mobs get about 25% tougher from expert to master and boss mobs are about 50% harder.

On playing a second character starting on Master this time, I noticed an increased number of mobs in the same rooms. So like 5 zombies where there had been 3 on my first play through. I don't know if this was random or based on what lvl I was at the time.

The thing I still haven't figured out is if playing on Master increases your skill ups. I figured, more hp means more swings means more one-handed skill ups. But my skills weren't noticeably higher. Anyone else test this? Its possible you get skill up based on percentage done to health rather than damage done. So more hp would not mean more skill ups.

My final preference is for Expert. Its hard with a lot less instant deaths from bears, saber cats, and bosses.

Bump....

Can't believe there isn't somebody here who knows...