I'm very new to stats (as well as options), but I thought the area under the curve just represented %100 of the sample size. I don't really follow how that could increase or decrease. Err, scratch that, I get it now. It represents vol, and can increase in range along the x axis.
Riskarb, As you noted the strip vols rise in a down market but in my experience this is in U.S. (and possibly other country's) equity markets. Do you see this any place else?
All the low-vol markets seem to exhibit; SPX, DAX, etc. Also, the higher vol markets seem to have a more symmetrical vol-smile with +/- 25d calls and puts trading at similar vols such as the Nikkei and Kospi. Or it may simply be that the East doesn't value portfolio insurance as highly as we do in the West. Or maybe they're less inclined to hedge or panic; i.e., a longer-term investment outlook. Certainly the HF and PF use of equity derivatives is lagging in Asian markets.
Intriguing. I would be surprised if the notion to panic were isolated to a specific civilization but you never know. As far as I can tell the smile is fairly symmetrical, at least when compared to an equity market, with the currencies.