"Sure, modern games still penalize failure, but often in the most trivial ways. Getting caught by the police in Grand Theft Auto III will roll back your bank account, but won't do the same to your progress in the game. You'll never see a game over screen in Jak and Daxter - the worst punishment there is being sent back to a few hundred feet to the edge of the current environment. Going into a Metal Gear Solid boss battle? Just use the codec to save your progress and you can die as many times as you want without having to retrace your steps.
"It wasn't always this way."
Kyle Orland mourns the death of the game over screen.