Silent Hill 2 is definitely the top. Penumbra was really good as well, as is the Clock Tower series. Of course, the Condemned games get an honorable mention, and Alan Wake (my new addiction) is fantastic as well, though it isn't so much "horror" as it is "thriller", at least I think.
If Dead Space had actually been scary, it would have been listed, because I loved the combat and the story was alright... It just wasn't scary. The same could go for the FEAR series, though to a lesser extent, as those boil down to generic FPS really.