Clive Thompson says that video games do better at the horror genre than movies:

Indeed, the endless potential for ass-handing is why games may actually be a superior medium to films for scaring the bejesus out of you. The horror flicks of the '80s always tried to generate a sort of proto-interactivity: all those terrified viewers, screaming "Don't go in there!" at the screen, wishing they could somehow reach out and personally guide the Final Girl to safety.

In a game, of course, the fourth wall is obliterated, and you actually do have the choice about whether to go into The Bad Room or to run screaming. If you're a total coward (like me) this ability to control your fate induces considerably more suspense, because I head-game myself into a frenzy. I'll start down a corridor, hear something freaky up ahead, then freeze in panic. Maybe if I stay quiet the monster will go away? Shit, maybe it's already headed this way, and I should move! But if I move the monster will hear me ... so maybe I should stay quiet ... gaaaaah!

The best game to do this, at least from my perspective, was Eternal Darkness. Why? Because it didn't just mess with the character - it messed with the player, making them think the TV'd done something odd, the console crashed, the controller become unplugged. Of course, playing the haunted orphanage level of Thief 3 around 3 AM during a thunderstorm was pretty crazy too.