I'll chip in here.
Often, a completely overpowered God character is needed, and vital, to the server. A hero that's incomparable, who creates, guides, and protects the actions of other characters. Something manipulated by a leader to ensure everyone has fun. In pen and paper roleplay, with a gamemaster, it's a lot easier, as they can assume multiple roles and keep the entire story moving.
In freeform roleplay? It can be a great deal harder to create, and prevent from being stagnant. An majestic character is very, very good at preventing this from happening. If you want a practical example, imagine that Exile wants to get the server gathered against a foe; for example, a fierce dragon licking its wounds, and preparing to strike back. A character of proven power has the ability to say, "Bam. Get over here, and help," and more importantly, supplies a reason, and motivation, for characters to listen and do as he suggests. If you've been to Half-Life 2, Rex Lee is a good example of this; a gaming example would be Satele Shan, from TOR. Alternately, imagine Strelok, or one of his group, coming up and explaining a problem he doesn't have time to solve.
My $0.02, and it depends on the situation and how the character is portrayed.