I can agree with this for the most part, but I think it would help if you could make a small list of what you consider good "Horror Games". Because I don't think I ever played one other then the original Dead Space. A list would provide good insight(at least for me) as I generally don't play Survival Horror games that often. And yes, I agree torture porn is a poor substitute for true horror.
I feel I should probably level a bit here with some people -- It's not that I dislike western-designed horror games, in fact it was a bit hypocritical on my part, and I think generally my frustration is based around the general mistreatment of horror, as a genre, as it is today. In that respect, when I see the reboot to Fatal Frame on Wii-U, I can'thelp but think, that it seems to be mostly the Japanese, who manages to capture that exact type of "survival horror"Iwant. From a cinema point of view, I'd argue horror hasn't been the same since Cronenberg's early days, Hitchcock orwhen George Romero didn't suck.
But anyway, let me oblige here.
My favorite horror game of all time is Silent Hill 2 -- I wrote little bit about what it is I think that is so great about it, on my "still in progress" Super Star Tag Team Best Games of all Time list, formerly a Top 30 list but that isn't enough for me. I still need to fill out, but I've written a bit for Silent Hill 2 here.
Other than that there is..
Eternal Darkness: Sanity's Requiem. This game actually juxtaposes everything one might expect from western developers, but it was made in a better time, back when console manufactors cared more about the games instead of brands, cable TV or comparing willies with the competitors. It's a Lovecraftian inspired horror game of which Amnesia has definitely taken some pointers from. It has this surreal edge to it. The game will litterally break the fourth wall, as the "Sanity meter" which is a concept unique to Lovecraftian inspired material -- It adds this psychological edge to the game's overall spookyness. Essentially, it's a green bar on screen, which is depleted through various events that occur to the player as the game progresses, generally it's when you're hurt by enemy monsters. You restore it by performing certain "finishers" on knocked down foes. As the bar becomes low, subtle changes are made to the environment and random unusual events begin to occur, reflecting the character's slackening grip on reality, and as a result... the player as well. If you've ever played the first Metal Gear Solid, then think Psycho Mantis and it's basically that but 10x more of it and even more intense.
As a result, the depleting sanity meter will cause certain "sanity effects" to occur on screen, consistently used is a skewed camera angle accompanied by whispers, cries, and unsettling noises. The lower the sanity meter, the more skewed the camera angle and the louder the sound effects. Fourth wall breaking effects include simulated errors and anomalies of the TV or GameCube (one effect being a Blue Screen of Death); this does not affect gameplay unless the player misconstrues them as actual technical malfunctions and attempts to correct them. bugs will show up on the screen. Some of these abnormalities and effects will actually be different depending on which character you play, there are many different playable characters throughout the game, and they'll usually reflect the inner psychological fears of your player character. It's such a novelty concept, and add that with an engaging enough story of which you'd expect from H.P. Lovecraft, plus a young Jennifer Hale as the main heroine, and you got yourself an excellent horror game.
It exist only on Gamecube though, so you're out of luck if you don't own one or a Wii that is.
Other than that game there is Silent Hill 3 -- That game is essentially, but not completely, great for the same reason as Silent Hill 2. I promise I'll write more detailed recommendations for all of my examples in the future.
Condemned is an excellent game too -- I like the combat, the atmosphere, the vulnerability it brings, the melee combat functions so well. It actually paces quite well, on a down to the eart level, where it feels fluid, and you're not the invincible son of Zeus who can take all the punks down. You're as vulnerable as the psychotic drug attics and maniacs you're fighting against. Essentially, the game plays like a crime-solving murder mystery, mixed with the some neatly toned horror. The protagonist is an FBI on the run from the law, as he suddenly gets framed for the murder of two colleagues, who gets murdered infront of him by a serial killer he has to pursue. The journey of trying to catch him is intense. Let me tell you just that. I'd go on but I feel there are other examples I like to mention, just short, without derailing this thread too much longer.
Other quick examples would be the Resident Evil remake (there's an HD remaster coming out soon so be sure to pick that one up)
The first Dino Crisis had that same edge the old Resident Evil had too, but I feel Resident Evil tries a bit too hard with jump scares and doesn't quite get to that same level as Silent Hill does. Silent Hill manages to weave in an interesting story, along with a great soundtrack and interesting flawed characters. It's got lots of things covered for it to earn its adoration from its fans -- That's for certain.
There are others I can't think of right now -- So I'll mention them some other time in a PM to you, if you'd like, and you're interested in delving into some neat horror games.