Guild Wars 2

So I get how the loot works, but how does the difficulty work?

If you have a lvl 30, and a lvl 5 in the same run, lets say the level of the fractal is lvl 30, but the loot lvl for the lvl 5 is 5. Will the lvl 5 experience tougher enemies and agony? How does this work?

Yes.

Which is why I wouldn’t run more than a few levels higher.