What makes good horror?

First, let's note the difference between dread and surprise.

Surprise is easy to inspire. All you have to do is expose the audience to something sudden. Mixing sudden motion with loud sound is the best way to go.

Surprise builds with anticipation, so filmmakers lead up to it by letting the character in question suspect that something is coming, or alternatively, grow obviously unsuspicious. We call these "jump scares", because those are the moments when the audience jumps out of their seat.

Part of the reason jump scares are the easy, effective way to approach horror is that they are a cliche that works every time. Watch Drag Me to Hell - nobody working today does jump scares like Sam Raimi. That film uses the oldest tricks in the book - it's an old saw, if ever there was one. At the same time, it's a great little movie. Terrifically fun and overwhelmingly effective.

Dread, on the other hand, comes from a conflict that can't be resolved. Dread is about the promise of shadow wherever there is light. Make that promise to your audience, and you begin to tap those feelings.

Be careful and circumspect in how much definition you give those shadows. Not knowing is the scariest thing, right? Don't show your hand.

In the Exorcist, the demon can be thwarted but it can never be slain. In The Shining, Jack Nicholson is killed... but his reasons for going mad are never really addressed. His madness wasn't even his fault. What became of the darkness in the hotel? It persists.

How much do we know about the evil in those films? Just enough. We know there's more where that came from, but the evil is largely undefined. What the evil does - that's what we're really seeing.

If you want to juxtapose the mundane with the aberrant, do it slowly and gently. Don't break the grocery store reality with a zombie bursting from the fridge. Don't break it with a jump scare. Break it with a trickle of blood dripping from someplace abnormal, or with a strange little red-eyed insect nobody has seen before...

...or, for example, with a dense unnatural fog that rolls in from the lake.

Why? Because fear works on the unknown. We're not afraid of the trickle of blood, or of the mist. We fear the things it might mean, might conceal, might lead to...

If you really want to show the monster, feel free. Do it suddenly, and people will be surprised. Just don't expect anyone to feel anything more than that.