While I was trying to think of every blessed switch I'd need in a damage formula, I realized I had a bigger issue: the implications of various damage formulae on one's game.
1. If monsters and characters both advance linearly, how is the player experience changed from both advancing multiplicatively or exponentially, in both gameplay and psychology?
2. What are your favorite damage formulae, and why?
3. Do you find that adding a random element helps or hinders battles?
4. Is there anything that a damage formula can do to encourage strategy?
5. And last, is it a good idea programmatically to bog down something as integral as the damage formula with a million nested switches?
Okay, this may sound a little rude or mean, since the way I post things is fairly far from the way others do. I'm just letting you know ahead of time that if you take offense to something I write, no offense was actually intended.
In any case, I remember a similar topic on such things and I think I covered my own personal opinions on it there. If you haven't seen it (or don't want to go looking for it), I'll give a brief summation here. I prefer additive formulas to multiplicative because for me, it's easier to balance these values than if you had some kind of exponential growth. Even when playing games that use damage formulas in such a way that I'm hitting really big numbers... I'm not really paying a whole lot of attention to the numbers, because they're ultimately meaningless.
Okay, I'm an old grizzled ancient here (or maybe it just feels that way), but before I ever decided to try to design a game, I used to play pretty much every RPG I could get my hands on. The one thing that I noticed happening to me? I didn't care what the damage numbers said unless they were uncharacteristically low... or they were something like Max Damage Dealt. Any number in between? I didn't care what the number was. As a player, there was functionally no difference between 5404 damage and 5301 damage. Why? Because I was counting hits. How many hits to this monster before it dies? 3 Hits. Okay. If I get an extra 200 damage through a level up on this skill... is that still 3 hits? Or is it now 2? If it's still 3 hits, then what good is that extra 200 damage? May as well be an extra 2 damage on a 30 HP enemy. Functionally... no difference. Likewise, if I wipe out an enemy in one hit doing 20 damage... or in one hit doing 30... what's the difference? It's still dead in 1 hit.
For the player, that's the important thing. Okay, sure, some players like to min/max their characters (I'm one of those), but generally speaking, players like to see tangible evidence that gaining skill means something. Extra numbers for damage that don't mean anything are quickly relegated. A player won't say "I hit for 5463 damage!" They'll tell their friend, "Yeah, I hit it for like five thousand damage" or "Fifty-Four Hundred" if that damage matters in the hundreds' spot. They usually drop the 63 because it doesn't mean anything. It rarely kills an enemy faster or makes any sort of difference in combat if you're dealing with larger numbers. Sure, those extra digits can add up if combat lasts a while... But most RPG combat rarely lasts longer than 2 or 3 turns for basic enemies or longer than 10 turns for most bosses. So, your extra numbers on the end of the 5400 number are basically pointless.
Personally, I'm dealing with much smaller numbers in my combat system and a much more simplified and streamlined method of calculating damage. With the few playtests I've run with actual players on the combat system and in gaining skill points, they seemed to like the idea of progression. The power itself, while delivered in small increments, is delivered frequently enough to feel as if you've leveled up, and each stat point itself feels meaningful. Now, I will admit that I've only run these tests on maybe 5 or so players, so they're hardly conclusive, but it's the overall opinion (granted, it's not how I worded it, it isn't a direct quote, but the feedback I received was basically joy at getting new stat points and getting to see how much damage they then could do in combat). I'm not sure if that opinion would continue to carry if I tested with a much larger audience, but for now, it's all I needed to keep the small numbers and current damage formulas.
So, let me give you an example. Basic slime enemy has 8 defense. First character you start with has 10 attack. Basic attack formula is simply a.atk - b.def. There's a chance for a critical hit in there and a 10% variance (I like using the variance as my variable... to make it harder to pin down the exact amounts, as well as to surprise players with extra or less damage). Slime has 10 HP. So, it will take you 5 hits to kill it. Without a weapon. Okay, you do a quest and it nets you an item that raises Attack by +1. You use it. Now, instead of taking 5 hits to kill that slime, it takes 4. You're only doing 1 extra damage to it each hit... but hitting 3 each turn effectively takes the slime 4 turns to die now instead of 5. Okay, so you equip a Sword that grants another +2 to Attack. Now your attack stat is 13 while the defense of the slime is only 8. You're hitting that slime now for 5 damage each turn (give or take) and it now dies in two hits instead of 5. Now you feel powerful. Against the most basic enemy in the game. What if you equip a two-handed sword that has 6 Attack on it? Now your attack stat is 17. It still takes two hits to kill that slime, yes it does, but with variance in play, you might actually kill it in ONE hit.
Okay, so what about skills? Most of my skills have a "base damage" to them. Well, if they do any kind of damage at all, anyway (a large chunk of my skills are situational and aren't out there to do damage to enemies... merely turn the tide of battle... quickly). Okay, let's take a basic Fire spell. a.mat + 10 - b.mdf. Base damage of 10! Pretty cool, right? So, even if your Magic skill is 0... it still does 10 damage minus the enemy's magic defense. The character who starts with this spell actually starts with 15 Magic. Okay, same slime. What is its Magic Defense stat? 10. 15+10-10. Crap, its defense nullifies your base damage! Oh well, doesn't matter. 15 Damage and that slime is dead in one shot. Holy crap, you nuked that monster! What if I don't want you to magically nuke that monster? Oh, that's easy, I can half damage taken from Fire so you'll do 7 or 8 damage instead of 15. Or, I can simply bump up its Magic Defense stat by about 10 or 12 points to make it 20 or 22 and you're suddenly doing 5 or 3 damage to it a hit.
For me, these low numbers and lack of multiplicative skill formulas (oh, they're in the game, they're just not used how you'd typically use them...) make balancing much easier. I simply decide "how many turns do I want this monster to kill a party member in" and "how many turns I want a party to kill this monster in". It's easy to balance against current equipment and skills because I simply make a list of these things at each point in the game.
As for the question about a damage formula creating strategy... Eh, it's what all my damage formulas are meant to do. They're meant to promote a little bit of strategy. I have a skill that has "(a.mhp - a.hp) * 1.5". What does that mean? It means the more damaged you are... the more damage you'll do with this skill. Missing 100 HP? You'll do 150 damage. Damage on this naturally scales with you depending on how much total HP you've got as well as how much of that total HP you're missing. Early game, this skill might do a maximum of 30 damage. Mid game, you might be doing upwards of 300+ damage to an enemy with it.
I even have other skills that target other enemy stats as their defense (like Luck) for their damage and etcetera. You can do quite a lot with your damage formulas if you explore a bit.
But, me, personally? I'd rather have low but meaningful damage than high but meaningless damage. I like to know that getting 3 points into Attack makes me ACTUALLY stronger... instead of FRACTIONALLY stronger. But, that's just me. That's how I like my RPGs.