I Require Character Histories
In my games, I require character histories. Anyone who doesn't provide one doesn't get to use their backstory to effect the game world and they don't get to just make up something on the spur of the moment to suit some adventure.
Most of the histories I get are about one page handwritten. Sometimes, I get a few pages typed. I rarely get anything longer than that. However, I would read and if possible use a longer history if it was provided. I love working with character histories. It helps me tie them into the world, helps me create plots and events that really effect the characters, and it also seems to make the world and the characters a more "solid" place for the players.
Generally, I do not allow "fallen prince" sort of things in the history. There is just too much possible trouble from such a history -- trouble for me as the DM, that is. I will characters to have fallen from lower positions, and I do make the occasional exception for really good players and/or really interesting backgrounds.
I have done something that gave the entire party that background, however. I set up a game where they start with basically no memories after leaving home. Turns out the party was about 4-5 levels higher than they are now and a powerful magic stripped those levels from them, along with all of the memories for that same time period. So, they had a history, but no one knew it. It has made for some great roleplaying.
As examples of individual histories I've allowed:
One PC actually was a lost prince. His history didn't say that, his history left it up to me. The long-lost bastard son of the deceased husband of the very powerful NPC the party had been dealing with was just too funny to pass up. (And the player roleplayed it beautifully.)
In my current game, one of the PCs is the umpteenth son of a minor baron. The family's power was mostly stripped away by a rival lord. It gains the PC no real advantage, other than having to be addressed as "Lord" in his homeland and the right to bear arms there. It gives me the potention to have any of those other siblings get into trouble and I can always bring in the rival lord when the party gets too well known.
Also in my current game, one of the pCs is technically a minor lord in another country. The thing is: He doesn't want to be. His family wants him to be. He gets the title because any spellcaster there is nobility, and he is the first ever in his family line to be magically capable. Since the character won't go to his homeland, it gains him no advantage.
I thought he was talking about their player with the really good spirited history. All PCs should have dark & brooding histories with lots of tragedy...so I would have also killed that guys character! 
