Frankly, I'm surprised a thread (partially) about good horror in games hasn't mentioned Thief: Deadly Shadows and the "Shalebridge Cradle" Level. The rest has to be spoilers, because some people might not have played it, and I don't want to ruin it for them.
Thief: DS nailed the horror aspect of the level really well, and did so because they understood one of the key points of horror in an interactive game is to rob the player of their sense of comfort and security. Nothing is scarier than the unknown, and your own imagination can scare you better than anything on screen will. It helped that Thief was always about avoiding conflict, so you never feel like a badass with a thousand weapons, but it was still a game about making the player feel powerful. You spend every level being the hunter, stalking the guards from the shadows like an elite ninja. You watch them jump at your noises, you toy with them before sneaking up behind them, and taking them out. Darkness was safety and security, because it kept you hidden from noisy, overt enemies.
Then, when you're called to break into an abandoned, supposedly haunted, insane asylum, you find yourself robbed of your former position of power. For half the level, you're alone in a creepy, pitch black environment. The shadows that used to be your friends now suddenly seem like they could be concealing goddamn anything. And you have to listen to this all the while:
http://www.youtube.com/watch?v=Md0FLVpdPnw
And when you finally get to the generator, put in the new fuse, and get the lights going to let you see what the hell might be hiding in the dark, the sound of it powering up is so loud, so obvious, that you know that anything in the building knows exactly where you are, and you realize there are no more shadows to hide in.
To be honest, the terror of the entire level almost made me stop playing the game. To my mind, it's the best example of horror applied to a video game.
Then, when you're called to break into an abandoned, supposedly haunted, insane asylum, you find yourself robbed of your former position of power. For half the level, you're alone in a creepy, pitch black environment. The shadows that used to be your friends now suddenly seem like they could be concealing goddamn anything. And you have to listen to this all the while:
http://www.youtube.com/watch?v=Md0FLVpdPnw
And when you finally get to the generator, put in the new fuse, and get the lights going to let you see what the hell might be hiding in the dark, the sound of it powering up is so loud, so obvious, that you know that anything in the building knows exactly where you are, and you realize there are no more shadows to hide in.
To be honest, the terror of the entire level almost made me stop playing the game. To my mind, it's the best example of horror applied to a video game.