No, this is not a desirable situation especially if (beyond being out of level) the floor is not flat and the toilet rocks. Aside from being annoying, this condition can allow the toilet to leak or, under the certain conditions, can cause the toilet to crack.

Shims are one way of dealing with the problem. When using shims, don't use wood shims. Wood and water don't mix. Even under the best of conditions, a bathroom can be a pretty damp place and wood shims will promptly rot (leading to bigger problems). Plastic shims are available specifically for this purpose ? although shims are used where the gap does not exceed 1/4 inch.

Because your gap is greater than 1/4 inch, we suggest the following fix. Put the toilet into place and make a pencil mark on the floor around the base of the toilet. Shim it up using plastic shims that are generally available in the plumbing section of your hardware store. The outside edge of the shims should be held in about 1/8 inch from the pencil line. Remove the toilet and prepare it for installation by installing one or more wax rings at the underside of the toilet.

Next, mix up a small batch of epoxy mortar. Place a continuous mound of mortar between the outside of the closet flange and the inside of the pencil line ? making sure not to disturb the shims. Carefully place a layer of wax paper over the mortar (don't cover the closet flange) and lower the toilet into place and anchor it. The object is for the wax ring to seat on the closet flange and for the excess mortar to ooze out around the base of the toilet.

Use a damp cloth (wrung out frequently) to remove the excess mortar leaving a slight recess at the joint. Once the mortar has set up, use a utility knife with a sharp blade to trim the excess wax paper. Complete the job by installing a bead of latex caulk over the mortar at the joint between the bottom of the toilet and the tile floor.

By the way, the wax paper prevents the raw china at the underside of the toilet from robbing the moisture out of the mortar and will prevent your toilet and tile floor from "becoming one" should you need to remove the toilet in the future.