About 1 year out of law school I applied for an in-house job that was listed for someone with 5-10 years of experience. Because of a long series of "coincidences" I had some really unique experience due to a long-term project in law school that really matched a pressing need the company had at the time.

Now...obviously you don't apply for a something way outside your field, but if it IS in your field, there is no harm in applying for something that is a stretch. You may have some unique experience or connection that may not be revealed in the job description. Also, I think I have learned a lot from interviews for jobs I did not get...things you really can't prepare for in theory or self-prep.

My comments above are more about jobs outside your current company. Applying for extreme stretch jobs inside your own current company might have different consequences.