From revision 804 there are now difficulty settings. The 4 choices are:
- Normal (the default of the game, and the setting before 804)
- Smoking Crater
- Toughness of UFOs in the geoscape. They take more hits to shoot down at higher difficulty.
- Rank of alien units.
Alien units have ranks, similar to Soldiers, except that the aliens rank up over the time instead of individually. At "Easier" the aliens will be a rank less than "Normal", and "Smoking Crater" they are 2 levels higher. The max rank for Aliens is changed accordingly. Greater rank increases accuracy, hit points, and the weapons aliens will have on tactical missions. Also, higher level aliens show up in Scout ships much earlier in the game in "Hard" and "Smoking Crater". The final mission is always at max difficulty.
Note that this means at "Harder" and "Smoking Crater" you will encounter aliens at higher ranks that can be obtained by any Soldier unit.