Originally Posted by
rcofell
More difficulty = less probability for the ENTIRE network generating the next block. This is because on average the whole cloud will require more hashes in order to find an accepted solution per block.
It is one of the mechanisms used to slow down bitcoin generation according to the "schedule". The other is sometime in the future (~2012) only 25bitcoins will be "mined" per block, then 12.5 later on, etc.
Think of difficulty as decreasing how often a new chunk of coins is found, leading to you to get less coins found on average over time. This is in ADDITION to more miners diluting your share of the chunk as well. Although difficulty is directly correlated to more miners too.
No one knows for certain how often these increases will be, since it's DIRECTLY affected by how much compute power is out there mining. More miners = more difficulty + less share for you.
I believe the new difficulty is calculated every 2016 blocks, at which time the entire network adjusts it in attempts to make the next 2016 blocks take two weeks of real world time to generate.