Everything is working just fine.
Try to Remove Doubles, and double check your mesh for any errors. Also Apply Scale to it.
Here is whole process.
- Select All - A.
- Press I for Inset.
- Move mouse to get wanted offset.
- Move created geometry along Z axis - G>Z.
Edit for incremental height:
First of all you will want to use different topology for this case to prevent faces becoming non-planar after couple of insets.
Than you should follow simple procedure: Inset I > Extrude E and repeat as much as you want/will be able to.
No, there is no easy or efficient way to do this by outseting whole shape or extruding outwards.
You can make the biggest step, than inset to the smallest and after that start outseting from the smallest (bigger loops first), like so:
As you can see this method is quite strange and after this you will need to select each loop and extrude it individually.