I have the actual threat of death in my games. I also tend not to have Raise Dead/Resurrect easily available to the PCs. Death is hard and terrible.
That said, death happens rarely, and usually only as a result of conscious gameplay in my campaigns. I'll use examples from my Paridon campaign to demonstrate.
To that end, I design encounters based on how I want the story to flow at any given point in time. I have three different basic kinds of encounters: the Showcase Encounter, the Dramatic Encounter, and the Climactic Encounter.
The Showcase Encounter's purpose is to get the blood pumping and build feelings of accomplishment (with a bit of caution) in the characters. It keeps them engaged, and builds them up to meet the greater challenges later. This includes stuff like random orc raid, bandit attack, mooks of the BBEG, that sort of thing. The story is about how cool the PCs are. It gives them the chance to show off. Death is extremely rare in a Showcase Encounter. PCs might fall unconscious, but if, say, an orc crits for 45 damage, I'll handwave it and knock the PC out. No one wants to die to a faceless minion. So, I don't let it. Defeat is possible, but unlikely. If everyone's defeated, they are.
For example, in one such encounter, the party dodged a horse-drawn carriage, and the party's monk chased it down while the cleric shot at bad guys effectively. A pitched battle on top of a careening carriage later, the day is saved. The party took damage that was healed away, but everyone ended the battle standing and victorious.
The Dramatic Encounter is much more dangerous. Its purpose is to demonstrate the powers of the PCs' foes, create fear, and ratchet up the tension. Once again, death is rare, but defeat is much more likely. Ambushes and frightening moments are examples of Dramatic Encounters, as are initial introductions of the BBEG. It is possible to die in a Dramatic Encounter, but since it's meant as a demonstration, death doesn't serve the story purpose or entertainment purpose as well.
Paridon has had two such moments. The first Dramatic Encounter involved the PCs trying to take a mask off a protesting mook--which then suddenly exploded. The PCs were suddenly down to single-digit HP, their captured mook was dead, and everyone realized what the stakes were. In the second Dramatic Encounter, the PCs meet the mysterious murderous monster they are after, for the first time. He proves to be more than a match for the entire party, wipes the floor with them, and leaves. No one died, but everyone knew to fear him, loathe him, and keep tabs of the various powers he manifested to try to protect against later. It's quite possible that someone could have died in this second encounter, but prudence saved the party's lives, and death was not the goal, so it wasn't pursued.
The Climactic Encounter is typically the final encounter, the great showdown against the BBEG, where life and death hang in the balance. Death is definitely possible, and here is where I'll let the dice fall where they may. By now, the players should understand the threat they face. They should be (at least somewhat) ready for it. If a PC must die, this is definitely the time to do it, making a stand against the tides of evil. The action should be gripping, success uncertain, and demise foretold. Even here, though, prudence can save the PCs' bacon many times here.
In Paridon's Climactic Encounter, the PCs found the BBEG again, in a burning building. They braved the flames, met the BBEG, and stunned it through the use of LOTS of explosives. The building moaned like a great dying beast, and everyone knew it was on the verge of collapse. However, the party's paladin was not going to let the monster continue its reign of terror no matter what, and stayed in the danger zone to finish off the beast. The combination of the room collapse, the fire everywhere, and the monster's attacks killed the paladin--but he managed to kill the monster in the collapse as well. It was worth the sacrifice.
My campaigns tend to be more story-driven, and so I find this sort of structure is valuable. I certainly wouldn't use it in a dungeon-crawl style adventure or a campaign that focused less on plot and more on incremental improvement--in that case, there needs to be consistent danger to reap consistent rewards. But it's one way in which PC death can be managed while maintaining the "fun" of the game without constant paranoia on the part of the PCs.
