I practiced informed consent with my son since he was a toddler. When I’d tickle him or wrestle with him I’d immediately let go when he said “stop”, often followed by “tickle me again!”
When he’s with friends and cousins, I draw a similar line. I don’t mind them wrestling provided it is
I will usually check in if things look iffy, but he’s really good at releasing when he’s asked/told.
We definitely want our kids involved in at times painful activities as a means of increasing confidence, fortitude and resilience against future periods of discomfort to steel them against the trials of later life. A lot of boys will seek it out as a matter of course in hobby pursuits including martial arts.
I think there is also value in mostly not interceding in conflicts unless there is an established or establishing pattern of physical abuse. Kids learn greater social skills and develop greater emotional strength when they have to deal with the knocks and unfairness themselves, and rewarding tattle-tailing type behavior with the exercise of parental power (or even attention) over the reported perpetrator creates some probably not-good crutch-like dynamics in children's play stunting their learning of social skills.
I think it's generally not good for kids to have power over others even if that power is borrowed, as it often enables maliciousness in kids that are (let's face it) frequently little sociopaths trying to figure out how to gain power over others until they start developing more empathy in their teens. Their play interactions should be negotiated between them, not imposed by outside agents. Feign disinterest in their conflicts unless you see toxic dynamics forming. They should sort things out amongst themselves as much as possible.
For my boys (9,11) I'll only intercede if they are getting to the point of physical harm or danger, or if there is a violent response to an accidental harm (must learn to control violent/vengeful impulses). But they frequently wrestle with each other in play. It is a challenge to balance with my 7 daughter though as lacking physical strength of her older brothers she works much harder to use parents as proxies to fight her conflicts.
Less cotton wool and helicopter parenting is mostly good.
In general, we don't want our kids (10y, 8y) to hit each other. Learning to control your impulses is an important skill, and resorting to violence is usually a substitute for other skills we're prefer them to practice (understanding what the other person wants, negotiating). Also they could hurt each other.
On the other hand, sometimes the kids enjoy hitting each other. This is very different from hitting out of anger: they're both having fun, they're not trying to injure each other, it's more about force than impact, etc. Even calling both of these activities "hitting" is a bit misleading: a hit intended to inflict pain looks very different than one intended to knock the other off balance or push them farther away on the couch to gain a strategic advantage.
We wouldn't want to prohibit our kids from playing roughly with each other when that's what they both want, but this interacts awkwardly with normal rules. If Lily says "Anna hit me" but this was after Lily said "Anna, lets play a game where we hit each other" then Anna should clearly not go in time out. The way we generally handle this is flagging to the kids when we notice they're doing this ("it looks like you're playing a rough game") and possibly including a warning ("and someone might get hurt"). Then if someone does get hurt, and minor injuries are reasonably common with this sort of play, they know we're not going to punish the other person for it ("you were playing a rough game, and this is the kind of thing that can happen when you're playing rough"). If they were doing this upstairs or somewhere we didn't notice we do our best to figure out what happened ("What were you doing before they hit you? ... It sounds like you were playing a rough game.") but it's not perfect.
One way this could be abused is to use the context of a rough game to escalate to actually trying to hurt the other person. How this works out sounds like something that would vary a lot based on the actual kids involved, but with ours this is rare: I don't see them using rough games as cover for malice. Much more common are issues with not being on the same page about whether they're playing a rough game. We sort that out as best as we can ("Anna, is this a game you want to be playing?") and try to encourage them to do this on their own ("Does it look like Lily's enjoying this?").
I'm also curious how this will change as our youngest (3y) gets into a range where she'll start being able to do this kind of play with her older siblings. She's a lot more fragile than they are, and much weaker, but this might be something where a larger difference in the ability to inflict harm makes it clearer whether actions are in the "rough game" category?
(Julia also touched on this in her "advice for getting along with your kids" post.)