Interesting artical I found about Horror games by a writer from The New York Times Magazine.

Gore Is Less: Videogames Make Better Horror Than Hollywood
By Clive Thompson

"I'd only been playing BioShock for 15 minutes, and already I was trembling like a little girl.

It's hard to disentangle what precisely was scaring the crap out of me. Maybe it was hearing the rumbling moans of a nearby Big Daddy, and realizing it was hunting for me. Maybe it was the way those filthy, genetically modified humans would pop out of nowhere, dressed, improbably, in Victorian clothes and creepy Eyes Wide Shut clown masks. Or maybe it was their weirdly garbled dialogue -- how they'd shriek, "Get away from me!" while slashing at me with lead pipes."

full artical at http://www.wired.com/gaming/gamingreviews/commentary/games/2007/08/gamesfrontiers_0827