Omnicron's Baklava Enterprises
Smash Hero
Well, I'm thinking about trying the demo for this mindrape game.
My friend plays it on his laptop, and even watching it I feel a bit scared. He hasn't even met any monsters.
Anyway, this game is quite the frightening one.
Very short summary:
You are Daniel, a British man who wakes in a dark, old, seemingly abandoned castle. You have no way out, and begin to experience flashbacks as to what you must do.
You have levels of sanity, which upon depletion, begin to affect your gameplay and create audial and visual hallucinations. Starting from small clicking noises, to seeing cockroaches and blurry purple lines, eventually your insanity will take you to hallucinating monsters, slow your movement, and cause you to hear moans and monster groans when nothing is even there.
The storyline is small but good, but it's the gameplay that's obviously the scariest bit.