House Rule:

In order to keep things simple, any character wearing a full backpack is treated as having medium encumbrance.¹ (Think about how awkward it is to run with a backpack.) Additional encumbrance penalties may be assessed for special circumstances, such as carrying dead comrades or exceptionally heavy objects.

What this means…

Any character wearing light armor has their abilities affected according to the medium encumbrance category on the table to the right.

Characters wearing medium or heavy armor are unaffected as their armor already limits their movement and dexterity.

Dwarven characters do not have their movement affected, but may suffer encumberance penalties to their dex and skill checks if wearing light or no armor. (once again: dwarves in medium or heavy armor receive these penalties from the armor anyway.)

References

• D&D Wiki page on Carrying Capacity
• D&D 3.5 Archive Carrying Things (Part 1. , 2. , 3. )