This depends on the context and the details of the question at hand. A title's job is to describe as concisely and succinctly as possible the very core of the question. If that requires math, then cutting out the mathematics makes the title less descriptive.
Sometimes the core question can be described without pulling in any fancy symbols, in which case LaTeX notation should be cut. However, in many other cases, the core of the question centers around an object that really is best described in mathematical notation, and trying to dance around that just makes for a longer and more confusing title.
In that vein, here are some examples from the Physics Stack Exchange site,
and here are some examples from Mathematics,
as well as
from this site.
All of these titles compactly encapsulate in a few symbols of mathematical notation what would take a long sentence of text (and much more mental processing time) to describe.
Other sites, notably CS.SE and TCS.SE, take an opposite view, and discourage mathematical notation inside titles, which is to a large extent reflective of the fact that the content itself in (T)CS is much more amenable to textual description (with maybe a few complexity classes thrown in) than physics and mathematics. This site sits somewhere on the boundary between the two ─ which means that it does stand to get questions that are best described using mathematics in the title.
Furthermore, I contend that the primary purpose of titles is to be used for navigation within the site, i.e. they should be optimized with a primary use of display in question lists for both browsing and searching within this Stack Exchange site, where MathJax works perfectly.
That said, though, there are a few relevant points to be mentioned:
Use of titles by search engines. This is a red herring: the claim that the use of markup inside a title will somehow make posts more difficult for search engines, both internally at SE and externally, to index and process. That claim simply doesn't hold up, as the crawlers also have access to the full text, and it is that full text that should make a full clear textual description of the problem at hand and which forms the backbone of keywords that queries are matched against.
Display of titles in external search engines. This is the only real concern, and it is definitely worth considering and acting to minimize effects on. Most of Stack Exchange traffic comes from external Google searches, which display the un-mathjax-ed title and a snippet of the text; if the un-mathjax-ed title is unintelligible then that is a problem that needs to be weighed carefully, taking into consideration that (i) most people who care about the question are quite likely to be LaTeX-literate enough to get the gist of the title from the bare LaTeX, and (ii) the convenience of Google searchers needs to be weighed against the clarity of the title's display on internal listings within the site.
So, if a title has mathematics, should you remove the MathJax in favour of clunky Unicode rendering? Well, not particularly, no. Here's a massively under-appreciated fact: MathJax is a rather broader standard than pure LaTeX, and it will happily render a bunch of unicode symbols. This means that if you want, say, $$|\psi\rangle\otimes |\phi\rangle$$ in your title, you can typeset it as
$|\psi\rangle\otimes |\phi\rangle$, but you can also copy-paste the rendered output back into the text with dollar signs around it,
$|ψ⟩⊗|ϕ⟩$, and it will render as $$|ψ⟩⊗|ϕ⟩,$$ which is mighty accessible and often indistinguishable from the "real thing" that some TeX purists might insist on. (A point of warning, though: the output can change depending on the chosen renderer, so have a play with right click > Math Settings before you make up your mind. Also, not all unicode displays perfectly so this does not apply uniformly.) Generally, the added friction of an extra
$ or two in an expression like
$|ψ⟩⊗|ϕ⟩$ in a title as displayed in Google is a really minimal price to pay for proper on-site rendering, particularly given that the audience is already LaTeX-literate.
On the other hand, keeping the mathematics but removing the MathJax in favour of a half-hearted attempt in unicode is completely the wrong solution - it's the web 1.0 way to try and patch things before we had stable and robust solutions to displaying mathematics online. It sacrifices on-site readability for extremely dubious gains in external displays (which are mostly to an audience that can parse LaTeX to begin with) and there's really no real need for it, particularly when compared to the mathjaxed-unicode alternative.
Display of titles in other technologies, particularly RSS readers and the Stack Exchange iOS and Android apps. This is another red herring: there's nothing stopping RSS readers from incorporating MathJax rendering, and if folks really want to pull RSS content from mathsy sites without MathJax then that's on them, frankly. Also, this issue isn't unique to SE - there's plenty of MathJax'ed content from mathematics blogs that'll need proper rendering way before you need it for SE question titles. The same, but worse, goes for the SE apps: if they're not rendering MathJax, then that's a bug with the app, period.
In terms of actual actions, should LaTeX in titles be discouraged? That's really the wrong question, honestly: titles should describe as concisely and succinctly as possible the very core of the question, which often means that LaTeX markup is superfluous anyway, but when it isn't, it should be included. And, if LaTeX is included and the MathJax'ed-unicode displays equally well, then that's preferable.
And as for editing, the default should be to err on the side of inaction, i.e. do not edit other people's titles unless you are actually making them clearer and more descriptive of the core question being asked, much the same as the standard for other aspects of editing in titles.