Downloadable Content Offers Terrible Value
Developers have sold the idea to gamers that if they continually support a game long after release, it offers greater value. As long as a CoD: World at War map pack comes out every few months, that $5 charge to access it is more than justified.
This is a fallacy that takes advantage of consumer inability to judge value at the very low end of the price scale. Relative to the price of a game, DLC offers terrible value, and gamers who want more from a franchise would be better served by encouraging developers to start on a sequel rather than by paying for subpar DLC.
How did we get to where we are?
Gamers are notoriously impatient. Waiting 2-3 years for a sequel to a well loved game is extremely difficult and not the ideal solution. While some criticize annual franchises, and we’ve seen backlash towards Valve for releasing Left 4 Dead 2 so soon after the original, that’s only because gamers assume they can’t be offering a true sequel.
If developers were able to put out Uncharted 3 in a year, and it had all the improvements that we have come to expect in a sequel, I’m sure gamers would eat it up. This isn’t possible of course, so the compromise is DLC.
While developers made some poor decisions at first (Bethesda $5 horse armor, for example), they have since realized what gamers see as legitimate for $5. A map pack that includes 3-5 new multiplayer maps is acceptable DLC. A small mission pack or campaign segment is acceptable. Some DLC packs are must have items such as those that raise a level cap. Developers know what will stimulate demand.

WOOOooooOOOOoooo HORSE ARMOR!! It's a brave new world out there ... a better protected world
Red flags
Developers have relatively few potential missteps to avoid when releasing DLC. Gamers don’t like paying for elements already on the original game disc. When Resident Evil 5’s new DLC was only 2mb (an insignificant download), gamers concluded that it must simply be an unlock file for content already on the disc.
While I have argued in the past that there’s nothing wrong with this practice, that doesn’t mean it is received warmly. The bottom line is that almost anything is acceptable at $5.

Resident Evil 5 DLC: Bringing you more racist white cop slaughtering African zombies for the low low price of $2
Consumers cannot differentiate between value increments at the low end of the price scale. A gamer can judge whether something is worth $60 to them when making a game purchase decision; $5 is relatively trivial, however, so marginal quality differences relative to price are almost imperceptible.
Much like cash register impulse items, gamers will buy almost anything for $5, and that is their undoing.

Oh no, they knew my weakness! Some people impulse buy overpriced DLC. For me, it's mini rods. Once you pop ...
No value?
Take a recent game like Dragon Age: Notoriously epic in length, the regular campaign has 6 origin stories and numerous side-quests that make up its nearly 50 hour running time. All this can be had for the super low price of $60.
Some of the DLC, on the other hand, costs $5 and adds a single quest line that can be completed in under an hour. I’m not some sort of mathemagician but even I can tell that doesn’t quite add up. And yet, I own all the DLC packs. $60 of DLC at that rate would result in a game comprised of 10 hours of gameplay and 12 quests, which would be unacceptable to most consumers.
I think DLC is a good thing. I like new content for games I’ve completed and enjoyed, and it certainly increases the lifespan of existing products. That being said, they don’t increase game value across the board, especially given the relatively exorbitant price of some offerings when their content is taken into account.

Dragon Age: Origins - Awakening. Increasing Spectral Dragon content by 100% over the original. That's why I prefer expansions
Hopefully Dragon Age: Origins – Awakening, the new full expansion from Bioware, can usher in a return to the traditional expansion pack with a substantial amount of content, and move us away from paltry DLC.