I usually go with normal on my first playthrough, because 1, I'm not entirely sure what my 'skill level' is when compared to the majority of gamers, and 2, it's just kind of interesting to see what the developers consider to be "normal" difficulty. Then in my second playthrough I'll go for the hardest difficulty there is. Unless I know the hardest is going to be ridiculous, like extreme mode in MGS or something like that, then maybe I'll just go for hard mode, or maybe just not do a second playthrough.
Unless it's part of a series that I'm already accustomed to and understand the difficulty levels for. Then I'll probably do my first playthrough on a harder difficulty, or whatever difficulty I've found is good and balanced for that series.