I suppose this is where the main draw of the game is, and it works quite well...up to a point. I find that it begins to unravel as you begin to gain more abilities. So at the start of the game you can run across some captains, and it is very likely that they will kill you. When they do so they will level up, possibly gain some more strengths/weaknesses from the encounter, and comment on killing you when you see them again. Conversely, you can cause them to flee which accomplishes many of the same things, except that they don't level up. By the time you get most of your abilities it's rare for you (depending on the player) to get killed, or to actually have an enemy survive fleeing (unless you let them). The system is also inconsequential by the time you receive the dominate (brand?) skill which makes orcs your thralls. What's the point of the system when all of the warchief's and their bodyguards (which seems to always happen if you dominate a warchief) are under your control? They don't react to your presence at all, and by that point the game is effectively over.
It does have some strong points, mostly being the re-activity to an orc getting wounded/killing you to become a captain/surviving an encounter with you prior to becoming a captain. I always loved fighting orcs that I had injured in some way, and then having them comment on it when you encounter them. There had been an orc captain, Hogni Hot Head, in the first area (Udon?) who I came across during some missions/side quests. He originally had a torch helmet on which (eventually) exploded at one point during our fights. When I ended up returning to get some of the collectibles I had missed Hogni had become a War Chief, and had traded his distinctive torch helmet in favor some metal plates that covered the left side of his head. I was amused when I saw that his motive was that he was angry (at Talion) for causing the burns because they gave him extreme pain when he tried to eat. I quickly decided I would try to see if I could have both of his bodyguards betray and kill hem so I quickly dominated them. Unfortunately, Hogni had acquired the strength that he was unaffected by frontal attacks, as well as being accompanied by a "gang". What followed was a fifteen minute fight which eventually culminated in me hiding, and instantly killing Hogni from stealth. I felt bad afterwards, but it was still a pretty epic encounter.
I was also quite surprised that some orcs can be injured by you before they become captains as is the case with Dugza Raw-Head. I came across Dugza when I was dominating the warchief's in the second area when there were numerous openings for new captains. One of these captains was named Dugza Raw-Head, and his head was completely covered in bandages. It became very clear as to why during our first encounter. Apparently, Dugza had been present during one of my previous fights with an orc captain in which he was caught in the explosion that burned most of the skin on his head. Dugza miraculously (I suppose you could call it that) survived, and was quite angry at Talion during our first encounter. I felt sorry for poor little Dugza so I made it my mission to make him one of the strongest warchiefs in the area.
My final story ends with Pushkrimp Skull Hunter. Pushkrimp was the first orc captain I ran into in the game, and he quickly killed me with the help of the orc captain Hosnu the Hunter. Pushkrimp was an archer and as such was always accompanied by about ten other archers (since he had that strength), and his territory was extremely close to Hosnu. The pair ended up killing me about six times before I was finally able to finish them, and as a result they ended up being powerlevel 18 and 17 respectively. Unfortunately, that was not the end of their partnership as they both seemed to survive the first time. While I was killing one of the war chief's in the first area I was ambushed by both Pushkrimp and Hosnu who both had new scars as well as having their eyes be an odd blue color. I survived that fight and it seemed that Pushkrimp, Hosnu, and the warchief were all dead. This was only partly true as Pushkrimp somehow managed to survive his second killing and ambushed me a third time which finally culminated in his death, but not really. Pushkrimp appears to be the Leliana of Middle Earth, no matter how many times you chop his head off he'll still come back. My final fight with Pushkrimp occurred at the end of the game where he appeared for the Nemesis fight. By this time Pushkrimp had lost his left eye entirely since it was now covered by a similar metal plate that Hosnu had. I am really hoping that Pushkrimp doesn't make a fifth comeback...
It just seems to me that the nemesis system requires a lot of player micromanaging to really accomplish having more than one or two memorable moments from playing the game.