It's where the world sucks, PCs have no chance of meaningful victories, and all the NPCs are better than the PCs.
And let me repeat that again...
That's not unlike me saying that "High/Epic Fantasy" is nothing more than power-hungry player-characters stroking their egos through the subjugation of the NPCs.
"Heh heh heh, we killed Asmodeous... heh heh heh."
(Not that I believe that High Fantasy is like that, but...)
Once more, everyone!
More on topic, I think that there's way too much of our collective energies focused on the two extremes of "High Fantasy" and Geoff's much maligned "Grim & Gritty" games. It's very much up the GM and Players to decide what's going to happen with the power level, flavour and campaign focus.
The term "Grim & Gritty," as I understand, comes from a variant Hit Point and Damage system where even 10th+ level characters could fall to a single strike from another character. It's meant to be very deadly. It's meant to make threats of nearly any enemy... I've not looked at it, since I'd use a different game system altogether to do that, but that's pretty much the origin of the use of "Grim & Gritty" as a term.
Personally, I think that one can do just as much as one wishes to do with a "fantasy setting." The limit to that is not the genre itself, but one's interest, and knowledge of the themes, flavour and milieu of what makes a "fantasy setting."