Suggestions for Future Horror Games

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A more complex game just gives you more ways to get into the player's head. There are plenty of ways to fuck it up, but a designer worth his salt can keep a multifaceted experience intriguing and engrossing. Tight scripts and unique setpieces can definitely have their place, but they need to be tied together by lots and lots of challenge.

I'm not so sure about that - or maybe I just misunderstood your post. Challenge is good in general, but it can get in the way of immersion if it is too game-like. If the player has to focus on tons of controls or a lot of complicated game mechanics it will be much harder for him to believe that he is truly in the game world, as he is thinking about the abstract mechanics behind that world instead. The same applies if a challenge is too hard and the player needs to constantly reload and start over - the whole immersion is lost. A monster that appeared as a horrifying threat at first simply becomes an annoying obstacle if you fail to get past it for the tenth time - like a difficult jump in Mario.

The classic challenge-reward scheme of game design does not work well for horror games in my opinion...which of course doesn't mean there can't be any challenges at all. But I think they need to be of a different kind - and of course not action-oriented (reflexes, dexterity etc.). Right now puzzles seem to be the only way to present a challenge to the player without putting him in a "game" mindset. But I'm sure there's more ways.

I think the thing that keeps the tension going is if you don't have a clue to what the monster is like, only what it sounds like. I always flip shit if the monster sounds are behind me in the fog chasing me and I have no clue what he looks like.

Yup, exactly. I think one could create an amazing horror experience without ever showing the monster. (Would prevent people from creating kinky fanart, too!) Maybe have the player catch a tiny glimpse of it every now and then to make sure he doesn't just ignore the sounds after a while. It would work very well with some sort of Deep-Sea setting imo: The monster could come from every direction, it could have any size, your sight is naturally limited by your mask, the flashlight and murky water and sounds are already very strange under water...