In the PlayStation era, games like Silent Hill forced you to baby-step around the world out of genuine fear for what was around the next corner. That game's signature fog helped create an atmosphere such that, even if you knew exactly where to go, you had little idea what to expect on the way to your destination. Though the effect added tension, which in turn morphed into fear, its primary use was in response to processing power issues of the era. Distance Fog, as it is referred to, obscures objects in the distance and loads higher resolution (not high-res, mind you) textures as players approach them. The fog, one of the signature elements of the original Silent Hill, was used to ease limitations of the hardware and Konami brilliantly used it as a narrative device.
But as tech has grown more powerful, major developers have typically expanded games. With limitations abandoned, it seems they have no incentive to make reserved experiences. And with that, survival horror games of this generation have lost all mystery.
As we grew out of that generation and into a new one, survival horror games began to shift alongside it. Resident Evil eventually evolved into a very different kind of game with Shinji Mikami's Resident Evil 4, which helped birth a new approach to third-person shooters that led to games like Gears of War. Limitations became more distant and designers began to play with the room they had left. But the evolution of the previous generation made way for some supremely scary games, such as Clock Tower 3 and the Fatal Frame series.
In this generation, even as late as 2008, a game like Dead Space offered slow and methodical gameplay that used fantastic sound design to scare players senseless along with action moments. But as each iteration of Dead Space is released, we see the series abandon those tense moments for cheap "jump scares" and swarms of enemy attacks built to increase pressure. As technology gets better (and easier to work with), things tend to expand into "cool moments" and step further away from interesting ones.
It was the lack of technology in previous generations combined with our natural xenophobic tendencies that helped create situations that appeared far more terrifying than they actually were. While gamers found tension in those unseen monsters in the distance, developers were battling the ceiling of the tech they were expertly used to working with.
Sales are still the biggest factor of how games have evolved, though. Resident Evil 6 is a good example of this, with multiple campaigns designed to be an amalgam of various popular titles seen this generation, which left the game unfocused as a collected experience. Think about how many games added a "Horde Mode" after it was popularized in Gears of War 2 (or, let's face it, re-popularized since Robotron: 2084). How many games this generation have zombies or have added them as DLC later? Or zombie horde modes? The industry has a habit of jumping onto the biggest trends to maximize player comfort and, they hope, sales until it is tapped dry (take musical games, for example). Trends have moved major publishers away from "restraint" in favor of hardware-straining bombast, abandoning horror.
This is where indie games come into focus. A terrifying game like Amnesia: The Dark Descent is built on tension and atmosphere. It's not about surviving a battle, it's about hiding from encounters. Indie developers use technology to create gorgeous or scary locales, using the unknown to create a terrifying mystery. Compared to a game like Dead Space, Amnesia is almost neutered in the abilities it affords players. There are no epic battles to be had, replaced with uncertainty. It isn't an action game with marquee moments it presents to players, but offers countless situations where a player's reaction becomes a part of the experience. (See YouTube for examples.)
For the mainstream, what may be perceived as small ideas are the blood that help make games like Amnesia or Slender so interesting. But publishers this generation, especially so late, are averse to taking such risks as offering non-action-focused experiences. With a recent report that major games sales are knocking out the middle market, it's clear why they have decided to stick to what works in most cases. There seems to be a perception that if the experience isn't "huge" then the sales will be "minuscule" in comparison.
But it was the rise of technology that helped pave the way for a development team to craft that first Horde experience, or add those cacophonous set-pieces to games. The same games that used to leave their mark with showing less in the name of mystery and out of limitation.
Whereas the major publishers had crafted terrifying experiences in the past, we now look to indie devs for new scare. And they seem to be hitting the mark, so far.
Things become infinitely less scary as soon as they are laid out and presented to us. That noise you hear late at night stops your heart from racing once you realize it's just an open window or a pet. And as our favorite entertainment medium achieves greater heights in technological advancement, developers tend to unravel the unknown in favor of more bombastic experiences. In the realm of fear, less is more ... but technology craves to be used. So we see everything in mainstream games, and mystery has become a dated concept. To this end, I fear technology is quickly making the industry's scariest genre one of its safest.