I dont think that games were any more scary or immersive back then than they are nowadays just because ALL (3D) games used to look just as bad. Nor do I think that horror games would have some kind of expiration date
I've played quite many good looking horror games and many of them didn't scare me one bit, while some games with really bad graphics have managed to scare me. For example I had no previous experience (=no childhood nostalgia or anything) of System Shock 1 when I played it for the first time this year and I felt a lot more scared playing it than I did playing Dead Space. The original System Shock looks absolutely awful by todays standards. Dead Space is a modern HD game and many people say it's really scary. And it's not lack of experience, I've played many modern horror games before playing System Shock 1, so seeing modern HD graphics hasn't desensitized me to 1990s graphics.

When I think about "top 5 games that have scared me the most", 3 (counting all the Thief games as one) of them look bad/laughable.
Silent Hill 1. Looks really outdated.

Thief-series. The ambiance and some tight encounters, but most importantly the Shalebridge Cradle. 1 is moderately outdated, 2 is a bit less outdated, 3 still looks absolutely great.
System Shock 2. It's about as outdated as Thief 1/2, Half Life 1-level. Still passable. Very blocky enemies though.
It's worth nothing that all of these games have superb sound design
On the other hand I've played quite many good looking horror games (Doom 3, Silent Hill 2-4+Origins+Shattered Memories+Homecoming, Siren and Deadspace 1+2 to name a few) that I didn't really find scary.
So any theories on why some people can't get scared by primitive graphics?
