It's good experience to play up now and then but if you play up all the time you won't know how to finish off a game where you have a small but solid advantage.
Playing Up or Not

I agree that always playing up could be quite frustrating, while playing down might increase your winning chances, but might also tempt you to adopt an inferior style of play. For these reasons, I create challenges within a 200 point range - 100 below my rating to 100 above.

Well OTB playing down is not an option which I think is good, but even online it doesn't make too much sense.

Always play people who are at least at your own rating or higher rated. It forces you to improve. Its like an adult who wants to pick a fight; you wouldn't go seek to fight little kids on a playground. People should go pick on people "thier own size".

Playing up forces you to concentrate, bring all your knowledge and skills to bear, and raise your game to a new level. It can be tiring though, and discouraging if you lose a lot, but in the long run, you'll become a stronger player if you seek out challenging opponents.

I've had some great competitive games from players below me and have swept some above me. A mixture is good, but I prefer to play up to improve my game and keep me on my edge.

I was amazed the other day to find myself playin' a 2500 whose average oppo number was in the 1700s - my number only 2050, but average oppo is 1885 - I does seem to lose a lot, but my two worst losses came in unavoidable time-outs against 1600s - not sure any of this number stuff really counts for anything at all

What if you're an older player but new to chess
The majority seems to be with playing up. I guess one can ask how up? OTB usually there'se the reserve U1700 and then the open, sometimes there's an Amateur. As I approach 1400 the U1700 will certainly give me some higher rated opponents, especially if I win. The open would seem to be maybe too high up?

In each game, if one player is playing up their opponent must be playing down so logically there must be the same number of people playing up as playing down .
I tend to play a lot of tournament and team games and take them as they come.

Play up as often as possible, but...think digestible portions too. By that I mean if you are a 1200 player, don't take on too many GM's for a while.
Especially all at once. Kasparov used to play simuls against a roomful of GMs, but probably you should hold off on that until you get better.

Something to remember:
You can't always play up.
By definition, if you are playing up, your opponent is playing down. If he always wanted to play up, you wouldn't get a game against him.
So, be fair. If you sometimes want to play guys 200 above, you have to sometimes play someone 200 below.

Simul against 4 GMs at Baden-Baden Germany 1992
Kasparov vs. GM Matthias Wahls 1-0
GM Eric Lobron vs. Kasparov 0-1
GM Gerald Hertneck vs. Kasparov 1/2-1/2
Kasparov vs. GM Vlastimil Hort 1/2-1/2
Simul against 4 GMs at Tel Aviv, Israel 1998
GM Boris Alterman vs. Kasparov 0-1
Kasparov vs. GM Boris Alterman 1/2-1/2

Simul against Czech national team, Eurotel Trophy, Prague 2001
Kasparov vs. GM Sergei Movsesian 1-0
Sergei Movsesian vs. Kasparov 1/2-1/2
Simul against Israeli national team, Tel Aviv 1998
GM Emil Sutovsky vs. Kasparov 0-1
Playing up is good, but perhaps, one should hold off on the all-GM simuls until you are up near Kasparov's level.
You cannot possibly learn anything by playing something weaker than you are.
Probably the least intelligent thing i will hear/read today

As an improving player, I play up in tournaments more often than not. But those are the big tournaments that are divided into 200 point ranges. So currently rated in the 1700's USCF, I played in the U2000 section of my last tourney instead of the U1800. I think I've tended to play up that way in roughly 80% of the major tournaments I've attended. I do think I should probably play in my own section a little more often. I think playing up roughly 1/2 to 2/3 of the time is probably ideal.
In internet games, I usually seek opponents rated between 100 below me and 300 above me.
Today on ICC Ben Feingold mentionmed he advises his students to play up to get experience against better tournament players in order to improve. I know several local people who have the same philosophy. On the other hand, I've been told to play the lowest section possible to get some wins and to learn in a somewhat more positive environment. Either way, if the both work, the end result will be a higher rating and the ability to play up will become moot. How do people feel about this, play up or play at your level and work your way up?