We can cover a lot of ground with this subject, it depends on so many conditions and types of games it's not even funny. Having permanent death isn't always good nor is it always bad, and sometimes it's there as an extra mode to consider if the player cares to try but isn't obliged to (such as "Hardcore" modes like in the Diablo games for example).
For games that deliberately want to be (and are) simulation-oriented and try to focus on so called "realism", then perhaps it's better fitting there, but sometimes it can also work well even if it's not based on simulation, such as for the STALKER series. Additionally, some games aren't lengthy or are literally free (F2P or some Indie games for example), and so depending on the length (well, rather its duration I should say) and sometimes the price of a game then a player might just not care so much about his character(s) dying permanently.
And, for some games it just wouldn't fit or would be exaggerated. Would you play a Mario Bros game with perma death? I wouldn't, that would be stupid. But would I play a STALKER game with continues? Well no... but I already have saved games to load from for a new attempt, although I might have forgotten to save earlier and I'd still have to start again from a much earlier point (which sometimes is about just as worst as an actual perma death would be). There's also some games trying to approach it differently and gives you a chance to do something about it before you die, while still not able to fight as well or not at all until you save yourself, or someone comes to help you.
For example, Left 4 Dead ("Player Down" state, you can't move and only rotate the camera very restrictively to shoot a little bit until someone comes to help, or you bleed to perma death for the whole match until the next map portion loads), Guild Wars 2 ("Down" state, either save yourself or wait until someone comes, although the consequences of dying where you fell are barely annoying at worst), Mass Effect 3's multi-player (another game with "Down" state, but at least in that case you're actually pretty much dead, you can't fight, can't do anything until someone has to come save your life, and if not certain specific enemies can sometimes bring instant death to you with a mini non-avoidable animation depicting your character's final moment at the hands of a Banshee impaling your gut and letting you fall dead on the ground, without the possibility to be brought back to life by a teammate).
There's been many ways to approach "challenge" in general, or just the subject of death/continues/saves in gaming over the decades. I think that overall the best "death" mechanism is one that fits the game type itself, or is "plausible enough" within the game's settings, context and environment. But I hate perma death or very punishing death or check point mechanisms (and the likes) in games for which it really wasn't necessary, but was done as such just for the sake of adding supposed "challenge", when it fact it just adds to frustration and nonsense.