A lot of people's definition of 'survival horror' is 'classic Resident Evil.' Anything diverging from what Resident Evil, considered the genesis of the genre, had done is wrong in their minds: Limited inventory space, terrible, terrible controls, a strict rationing of supplies, puzzles so mind-shatteringly stupid that it makes you think of the worst examples of point-and-click adventure games, and even the mortal sin of rationed saves. Note that none of that is any more than incidentally related to survival OR horror.
It is the same kind of fallacious thinking that makes people say 'role-playing game' when they mean 'level grinder with magic swords.' The genre is being confused for the cruft it has become associated with, rather than for the actual core values and goals of the genre. For genres that are named FOR their mechanics like real-time strategy or first-person shooter, this is a non-issue. But genres like survival horror that were named along the lines that genres of other media were are today hamstrung by their association to outdated, often worthless mechanics that someone in the eighties or nineties mistakenly thought would be clever, unfortunately preserved by the suicidal tendency of developers to appease fans at the expense of gamers.
Survival horror certainly has changed, but it has changed for the better. The mechanics that Resident Evil popularized did a lot to hold the genre back. They did nothing to provide an intriguing experience, but genre veterans would have it no other way and would suffer no innovation. I think genre outsiders slowly figured out why survival horror was and is a niche genre: mixing the above bad mechanics with violence and horror icons like zombies, ghosts, demons and what have you, is not the same as providing horror. That's just providing things associated with horror. This isn't the same thing, just like making a turn-based strategy game in which the three sides were Van Halen, Pink Floyd, and Journey isn't the same as making a music game. That's just throwing something music-related into completely inappropriate mechanics. Not that I wouldn't totally buy that game. I just wouldn't expect an actual music game, and wouldn't expect music games in the future to incorporate elements of turn-based strategy if that game became inexplicably popular.
The mechanical choices of Resident Evil almost invariably hamper the experience rather than supplement it. A good rule of mine is that doing the opposite of what classic Resident Evil would do will almost always supply the right choice. To test this theory, let's look at a few examples.
Silent Hill 2
This game is fairly dated by now, and much of its structure holds true to the old RE model.
Compare: Both games feature tank controls, bad voice acting, gratuitous, illogical puzzles, bad camera, and combat made more dangerous by its unpredictability and clunkiness. Note that these are almost universally cited as the worst aspects of the game, which the game is considered good in spite of.
Contrast: Whereas the plot of Resident Evil is invariably centered on guiding a flat character through an ocean of gore to find a hidden lab to blow up, Silent Hill 2 is celebrated all these years later for its gripping, cerebral narrative based on self-discovery, introspection, punishment, and redemption. The game's focus on atmosphere and immersion, rather than the constant metagaming that dominates and characterizes classic RE, is considered by many to be the key to the game's longevity. Supplies, while often scarce, can be carried in any amount, and the player may save at any save point without further restriction.
Fatal Frame II: Crimson Butterfly
A bit more recent, the Fatal Frame series features unique mechanics and ideas.
Compare: Both games often have you exploring mansions with tank controls and earning the ire of the restless dead. Metagame thinking and power gaming often occur to the detriment of the setting; though great emphasis is placed on immersion, it is somewhat damaged by the constant attention that must be paid to your 'arsenal,' in the form of setting up encounters to score big points to buy powerups and upgrade your camera weapon.
Contrast: Fatal Frame II was centered around a folklore-rich setup taking place in the aftermath of a great supernatural calamity. Rather than relying on the danger of combat or shock scares to provide a semblance or fear, Fatal Frame focuses on the terror inherent in isolation and instability, the feeling that you are trapped and never safe. Rather than meeting psychotic scientists who want to take over the world, the player is constantly confronted by the tormented spirits of the calamity, either reliving their last moments or lashing out in confusion and pain. A sense of victim-versus-victim is an instrumental complement to the greater theme of marching deliberately, if inexorably, toward your own terrible fate. Although healing items are at a premium, the player is never left without an offensive option; ammunition is not very scarce and you cannot run out of the weakest type of ammunition. Saving occurs at save points and is otherwise unconstrained.
Condemned: Criminal Origins
A product of the current console generation, Condemned is often indicative of the current direction of modern horror.
Compare: I've got nothing. The games are as unalike as they could be.
Contrast: Condemned is a first-person game centering on the role of Ethan Thomas, a well-developed character. an investigator of violent serial crimes. The combat is almost entirely melee-focused, with guns making a welcome but temporary addition to your arsenal. Condemned contains two related but distinct plots, being the pursuit of a mysterious serial killer and coping with the unexplainable phenomena tearing the city (and your own mind) apart. Although the player may only hold one weapon at a time, they do not break and are found all but constantly throughout the course of the game. Healing can't be taken with the player, but is found at regular intervals. The player may save at any time, without restriction. Combat is frantic and dangerous yet intuitive and fluid. the horror in the game is derived from the constant feeling of vulnerability and the fear of the unknown, which is delivered by the unexplained deterioration and insanity of the city around you, and the ever-more frequent collisions with an inhuman force. There is next to no backtracking, and instead of emblem juggling and key collection, gameplay diversions include simplistic but fun forensics exercises. Immersion is all but unbroken throughout the game, and metagaming is inextant. Voice acting and characterization are well-done, and the game controls as intuitively and easily as any modern first-person game. Note also that while Resident Evil's drastic changes in the fourth game were seen as a revitalization, the huge changes to Condemned's sequel were mainly seen as tragedies, rendering a continuation to the series highly unlikely.
As time has moved on, the precepts of classic RE-style survival horror have been all but abandoned, and entries into the genre are better off for it. If survival horror as it was recognized a decade or more ago ceases to exist entirely, nothing at all of value will be lost. The first Resident Evil game is seen now as an unintentionally hilarious way of how not to do anything right in a game, even as it continues to spawn completely unironic progeny.
I would argue that survival horror did not and could not exist under the burden imposed on it by the old genre tenets. As more and more of the process-oriented thinking was cast off, more and more goal-oriented thinking became apparent. Rather than concern over working a new survival horror title into the rigid and unsavory yet inexplicably obligatory mechanical and philosophical standards laid down for them, a slow change to thinking about and solving the simple question "How best can I make the player afraid?" began to spawn the new face of horror we see in Condemned, Dead Space, and BioShock. (Full disclosure: I didn't think BioShock was in any way shape or form scary, but a lot of people seem to think it had some sort of horror focus.)
I can't think of a single drawback to this change, and anyone pining for the old days mystifies me. What could be bad about abandoning ineffective, aggravating mechanics based around metagaming and frustration, especially if in return we receive a new generation of games based on the inexplicably recent philosophy of gameplay subservient to plot, characters, immersion, and mindful, robust utilization of the medium? Of pursuit of the raw and unflinching face of terror rather rather than the swaddling of stale, unsatisfying action in bad, illogical 'puzzles' and cheap shock scares? If that's the choice with which we, not as fans but as gamers, are presented, then I'll be the first across that threshold, flashlight in hand.
Survival horror is dead. Long live survival horror.