The concept of a Lovecraftian horror story set in space is one that is near and dear to my heart, so naturally I seized on Funcom's Moons of Madness the moment it was revealed. Playing the game, I got even more than I expected out of the concept. Not only was the demo level at E3 a wild ride of hallucinations, trippy yet horrifying dream sequences, and unbelievably horrific visuals. The game isn't a pure representation of any specific Lovecraft tale, but it does pull obvious influence from H.P. Lovecraft's various stories of madness, Ancient Ones, and slow creeping horror.
The game puts players on an isolated space station, housed on the moon. The shady company running the station has specific rules and regulations, with access to the various station areas being heavily monitored. Which gives the game an aspect of puzzle solving, as the player will sometimes need to find ways around the various security features in order to progress in the story. While the main focus is to follow your set daily schedule of duties, those duties get interrupted by various horrors, both real and imaginary.
Because the art style does not differ between hallucinations and reality, figuring out what is a dream and what is real is one of the major components of the game's mystery. And the demo build of the game absolutely nailed the necessary sense of confusion that Moons of Madness needs to capitalize on in order to work.
The game doesn't really rely on proper jump-scares the way most horror games do. Rather, the terror builds up steadily, with a lot of uncanny and unsettling moments being used to ratchet up the horror factor. However, because things aren't jumping out at you around every corner, the horror sustains itself with surprising longevity. The moment things start to go strange, you can't shake off the feeling that things are horribly wrong, even when things go back to normal for a while.
Which is the kind of deft touch and balance that you don't often see in horror games.
Now it could just be that the demo version of the game was a perfect crystalized moment, designed specifically to evoke those feelings, but that's always the risk with game demos. Based on what we've seen in trailers, and from the demo itself though, I think the full release will manage to come close to perfection.