I won't try to explain why I like movies to be scary; but the experience did get me to thinking about what is scary, and what isn't.
The thing I learned from the bad horror movie was this: realistic gore does not scare me. It doesn't matter how genuine those entrails appear to be -- I know they're not real, and I'm not scared. Horror happens in the imagination of the viewer. A movie has to engage my empathy, make me imagine myself in the horrifying situation. Somehow, it has to get behind my skeptical thoughts and chill my spine. And showing me every bit of violent mayhem (enhanced with excellent computerized special effects) is exactly the wrong way to do this. Far scarier are the movies are the movies that don't show me much at all.
Take The Blair Witch Project (available from the library only on VHS), in which three college kids get lost in the woods and encounter something terrifying. The movie never shows us the terrifying thing, and it's not at all clear what happens to those kids in the end.

All children are afraid of the dark. Spare me the entrails; the really creepy movies are the ones that just show you the darkness, and let you imagine what might lurk there.