Balancing has mainly to do with the longevity (longevity represents how long a game is played by a player in his life) of a title, as it affects the quality of the interaction between the player and the game he is playing.
Let's think of games as dynamic systems. As with any system, games must have some kind of equilibrium state that allows the system itself to perpetuate. In our metaphor, the longer the equilibrium is kept, the better the longevity of a game.
Now let's consider the players' actions as disturbances to the state of equilibrium the system is in at any given time. If the system of our game doesn't react properly to the players' actions, for example, it over or under reacts, the equilibrium state of the game collapses, thus ruining the gameplay experience.
In a First Person Shooter (FPS) the player usually controls a character that can sustain much more damage than the average enemy he faces, which is an example of an unbalanced condition. To balance the improved resistance...