The absolute best horror game ever made is "Eternal Darkness: Sanity's Requiem" for the Nintendo GameCube. That game WILL make you think you're hallucinating. Hands-down my favorite. I can tell you from real-life experience that the subtle nature of the hallucinations is entirely realistic and it'll have you doing double-takes, and wondering if it's you or the game that's going crazy. It's a work of lunatic art that plays fantastically from all aspects and angles. I can't recommend it enough.
Don't ask me how I know what hallucinating is like. Just take my word for it.
:P
If you have an O.G. xbox, look into "Call of C'Thulhu: Dark Corners of the Earth", which doesn't handle madness and hallucinations as well as "Eternal Darkness", but it does have an excellent ambiance and threads together several of Lovecraft's stories into one very playable adventure. It's not as finely tuned as ED, but it's awesome in it's own ways.
(DUH. I just noticed that you mentioned this ^^^ ["Call of C'Thulhu"] in your original post. Did I mention I have a problem with reality at times?)
For PS2, I'm inclined to agree with folks who list the "Fatal Frame" series (as well as the opinion that the second game is the best of the three). "Siren" is what I like to call an advanced-skills game, where if you're anything less than hardcore about your survival horror games, it might make you cry from frustration...
... that's kinda where I wound up by trying it... It's very difficult, and you need to be SUPER-thorough in your playing to get anywhere. Excellent production and presentation, but it's a difficult game (which they somewhat smoothed out in the sequel on PS3 - But that's not Legacy Platform so forget I said anything about it). If you're going to play "Siren", be patient with yourself AND the game.
:)
Enjoy!
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