A very interesting topic on vocabulary popped up on an writer's discussion board I participate in where someone questioned why an author would choose a "fancy" word over a more commonly known word. First, I wonder what a "fancy" word is. Is it just a word out of the reader's known vocabulary? Or is it a word that is rarely used in general public during this time period? Is it a word that is way too formal for the story/narrative? And really, is it a big deal if the author uses a word you don't know? Sure, you had to pull yourself out of the story to look it up, but now you know a new word. Education is always good, even while entertaining yourself.
As a writer, I refuse to "dumb down" my words, especially when I know it's the appropriate word. It's insulting to my readers. And I'll be honest, I don't have a huge or "fancy" vocabulary, but I DO write for children, teens, and young adults. Because of this, I have to be aware of what words I choose. For example, I had several fantastic beta readers for Land of No Angels, but had one mention that I should consider changing a word because it may be too advanced for the YA audience. The word was "equidistant", which I don't think is a very "fancy" or advanced word, but I considered the comment before ultimately keeping the word.
Had the book been a Middle Grade I may have changed it, but because it's a Young Adult book and my target audience is between 15-20, I felt that if they didn't already know this word, then they should. Don't YAs learn this word in high school math? I'm pretty sure they do. If they don't, then it's a great way to introduce them to the word. Why use two or more words to describe something that one word can? I trust that my readers are smart enough to either know the word, guess what the word means, or to educate themselves and look up its meaning.
Now, if the "fancy" words are used arbitrarily for no other reason other than to abuse the thesaurus and try to make the writing sound smart, that's where I draw the line. It tends to be easier to point out these instances since the vocabulary tends to be awkward when read with the rest of the story.
In the end, as long as the vocabulary is appropriate to the style, time period, narrator, and the audience, I don't see a reason to "dumb it down".