In an effort to increase accessibility, Fire Emblem now has new difficulty settings that you can toggle depending on your level of skill (or how much you feel like experiencing the wrath of RNG and how often you want to soft reset your game). The three difficulties are Normal , Hard , and Lunatic . There is no Lunatic+ in Fates .
If you are a beginner, or would like to experience the story without being interrupted by the difficulty of a level, Normal will keep the challenge fairly subdued (but it will still be there, especially if you are playing Conquest , or play Birthright without grinding). Hard and Lunatic are, obviously, the more difficult challenges.
Within all three difficulties are other settings you can choose to alter the difficulty of the game. Casual Mode allows for units that are defeated in battle to return the next battle, whereas Classic Mode returns to Fire Emblem's roots, where units that are defeated never return unless you start a new game file. Normal difficulty offers a third mode: Phoenix Mode . If a unit is defeated in battle, they will be resurrected the very next turn. Obviously, Phoenix Mode removes most of the challenge of the game, but is still a great way to keep your training wheels on if you are very new to the series. Casual Mode is a great way to play as both a beginner and a veteran for that layer of safety, but Classic Mode adds an exciting element of risk and challenge for the bold.
The game's plot and mechanics are largely unaffected by difficulty. What will be affected will be things like the levels of the enemies you face in the story, the number of enemies that spawn, the weapons, the stats, and the skills that they have equipped. Lunatic in particular will enjoy giving you enemies with very dangerous, deadly skills, even if said skills belong to wildly different classes, or are inaccessible to you, the player, altogether!