When you find out about Lady Grey's origins. In order to come to power as Bowerstone's Mayor, she trapped her sister in the cellar of their childhood home and left her to die.
Beyond the Demon Door outside the Rose Cottage (the one you have give a romantic token to) is a cave furnished with a four-poster bed draped in ribbons and such...and a rack, cage, head vice, and chains attached to a wall. Even worse, this is outside the house of the woman whose grandson you save from the Hobbe Cave, whom the kid implies abuses him.
The treatment of the Hero's family, namely Theresa having her eyes cut out by Bandits and the Hero's mother being captured and likely tortured by Jack of Blades. Not to mention the torture the Hero himself has to go through when he enters and is imprisoned in Bargate Prison.
During the third chapter "The Hero of Skill," there's a sub-quest that involves buying Brightwood Tower and spending a night there. You enter a Dream World ruled by a living treasure chest called "Chesty," who puts his 'Super Best Friend' through a gauntlet of "little children" (Hobbes), his other Super Best Friends (Hollow Men), and doggies (Balverines) before finally sending you home with the horribly depressing message "We'll be so lonely without you. And die." Not scary enough yet? OK, how about the fact that it's a Psychopathic Manchild chest?! Every time it shows up, it tells a delightful story about games it likes to play...like shooting the legs off an adventurer and letting him crawl to what he thinks is safety but is actually a swamp infested with flesh-eating insects? Quote: "That's one of my favorites. Maybe we can play it sometime!"
You can even do it twice.
The first appearance of the new, improved Balverines is quite unnerving, too. And Hollow Men in general. And finding out what Hobbes really are: transformed children. And Lady Grey's tomb, with the beetles under the sand. And then there's the banshees, who attack by sending shadowy creepy children after you, taunting you in their spooky voices all the while. For a relatively silly game, Fable II sure doesn't skimp on the Nightmare Fuel.
The Banshees. They whisper to you about things your character has done in the past.
Wraithmarsh, in general.
The fact that the theme is essentially a Nightmare Fuel version of the original Oakvale theme doesn't help...especially as you look out into the ruins of the village itself and realize that one of the best towns in the first game is nothing but a haunted ruin.
Hollow Men are particularly bad as you can hear the wisps entering the ground but you can't see where they are.
Especially when you wander near a Gargoyle. You know they can't hurt you, but sweet mother of God, they don't help.
For regular Nightmare Fuel, try Homestead/Serenity Farm. It's all nice and cozy until you look up at the sky... (also the rather creepy glitch that occurs if you look up and to the left of the windmill)
Try lingering in Terry Cotter's Army. It's bad enough on its own, but after reading his final journal...
And it gets worse in the "See the Future" DLC. You stumble across a cave filled with the suits of armor, including a skeleton with a journal surrounded by them, all apparently looking at the body. The journal's creepy enough...but a few of the suits explode and are revealed to house the blue shadow creatures.
The Terry Cotter's Demon Door is part Paranoia Fuel as well. After you walk in, you're treated to a nice house. And then you find Terry's bedroom...and then you have to go to the cave at the back to find the treasure.
Most of the "See the Future" DLC has some manner of Nightmare Fuel in it, especially the cursed snowglobe. When you start off, it's just sorta-weird naked guys who look like they're painted funny colors and drain the color for everyone/everything. No one seems to be dead, or even in danger, just annoyed. But later, you find a schoolhouse, and you can read the teacher's book...that says she found one of her students in such horrible condition that she only describes the amount of blood splattered everywhere, while her classmates stood grinning around her. Then she decided it must have been an accident.
In the same section of the DLC, one of the lengthy key puzzles leads you to find an invitation from Chesty. You find the house with the 'by invite only' sign, and go inside. Immediately, there's a long table with long-dead skeletons sitting in the seats, and coat racks with similar skeletons. There's a note from Chesty saying how happy he was to spend time with his super best friends, and something about a mirror...enter the floating mirror upstairs, and you find a fog enshrouded area with a bottle of red dye...underneath a suspended skeleton, contorted by almost Hellraiser-like chains that extend into the fog.
The first Hobbe cave. You help a man there terrified of going in to rescue his son, who has been kidnapped by Hobbes. He mentions then that he had always heard stories that Hobbes were all once small children who were captured by Hobbes and turned into them. This is the start of a variation of Apocalyptic Log that is heard from afar as the player runs around another path to get to the man's son. The sounds and the fate of both the boy and his father are enough to make anyone feel like they want to throw up... Not to mention there is no way to stop it from happening, even if you fry his son with fire.
There is a Demon Door, Memory Lane, with a chest at the end of a small, grassy road...lined with tombs, gnarled trees, and other junk. Off to the side is a wooden cabin you can't go into. If you look in the window, you see that the cabin is stuffed with white statue-like versions of characters from the game staring out at you. It doesn't help that the area is totally silent.
A lot of the Demon Doors, actually. Winter Lodge is a good example. When you walk in, it's a prettily-lit, idyllic winter path, with a warm, inviting house at the end. Walk through the door and, in a flash, it turns to a ruin, with skeletons and torture devices strewn about the area, which is now lit in dull, stark colors. And there's a screeching metal sound when the flip happens, that isn't found anywhere else in the game.
A minor one, but when you first pass through the Bandit Coast with Hammer on the main quest to the Crucible, a distraught Lilith stops you and asks for your help. She explains that her son has been taken by Balverines into the nearby Howling Halls. Once you enter, it is revealed that Lilith is actually a Balverine who has lured others into her den to feed her Balverine children. There are several hints leading up to the discovery such as the Balverines refusing to attack Hammer and Sparrow when they're with Lilith and said woman's name, which is that of a female demon from Jewish mythology.
Mourningwood isn't a particularly nice place, filled with the the souls and bodies of apparently hundreds of soldiers, and Logan sends anyone he doesn't like there because he doesn't expect them to survive.
Silverpines is also pretty bad, dark, forbidding, suspicious, and filled with Balverines.
The place is absolute Paranoia Fuel. If you're walking anywhere but in the town itself, it's perfectly reasonable to be walking slowly at all times, constantly turning the camera to view your surroundings with your rifle already in hand, ready to blow Balverines away at a distance the instant you spot them. And then they run at you.
The first encounter with the Crawler and its spawn is quite well done for a non-horror game. It starts with a fight with the glowy-eyedshadow creatures, then every moment you look around, you feel it's onto you. Except it isn't. It is only when it has lulled you into a false sense of security that it attacks again, harder this time.
And it does that TWO times, creating a very strong Paranoia Fuel for the player. Very unnerving to play when it's the middle of the night.
Its lines don't help much, especially not "You are tainted..." and the infinitely echoing hiss "He is ours. He is ours." And as for what it does to Walter, and the shop windows during the climax, words can't describe.
It's the way Walter starts freaking out the longer you spend in the Crawler's temple when you reach Aurora. At first, he tries to be brave and shrug off the general scariness of the temple. Then he starts to get more and more unnerved the farther in you go as you're exposed to horror after horror. By the time you reach the end, he's SCREAMING TO GET OUT OF THE DARKNESS.
The Crawler infects the world with Darkness that appears to eat away at the world; he even manages to do it to the Sanctuary, which pretty much means NOWHERE IS SAFE!
Go through game. Reach final battle. Need to pause for whatever reason. Scream.
"Are you blind yet? ARE YOU BLIND YET?"
"He is ours."
"YOU FEED US! YOU FEED US!"
It would almost fit into Large Ham...if it wasn't so damn scary!
Walter's eyes when you free him from the darkness bindings. Oh, god. His eyes. It initially appears as though they'd been removed until, right before you have to leave him behind, the darkness fades enough that it's just a dark outline around normal-seeming eyes.
And after all that, once you get out of the darkness and into daylight, you'd THINK you'd be safe, right? The Crawler continues to torment you outside of the temple, showing you mirages in broad daylight, all whilst apparently delving into Walter's mind, digging up his own Nightmare Fuel for being afraid of the dark and mimicking his disembodied voice. Long story short, day or night, the Crawler's already able to do anything to you from anywhere.
The Sunset House optional quest has you finding a ruined mansion in a remote location. At night, though, the beautiful ghost of the mansion reappears, and you might manage to return it to the real world. Bad Idea. The house is home to a creature of terrible evil that drove the old owner to suicide by burning down the house in an effort to stop it. His skeleton is dangling from the ceiling as you enter. The bedroom is worse. Whatever happens, don't go to sleep. It wants to play chess on a giant chessboard with living statues, but decides to just kill you instead when it gets bored of that. Then it gives you the house. Except it's probably still there, lurking in the unseen corners.
The game refuses to allow you to move your family into that house. There's probably a very good reason for that.
The golden gates. Look at them closely for long enough and you will notice something...uncanny.
In the late game—Treasury Value: 0/6,500,000. Projected Civilian Casualties: 6,500,000.
It gets worse when you go into minus figures while trying to be a good guy.
You think that's bad? Try going into the final battle when you're in minus figures and walk the streets of the towns afterward. No shops are open, there's nobody walking the streets...why? Because you tried to be a good person and almost everyone died for it.
The ending to the quest "Darkness Incarnate." After rescuing Walter, as you lead him out of the tomb, you are pursued towards the light by the Crawler hissing after you.
The Crawler's 'Children'.
The Crawler: Darkness shall spread across the world...
Demon Doors in general tend to be this. Not so much the doors themselves, but what lies beyond them. All it takes is for one of the interiors to freak you out for you to start getting on edge whenever you enter one. It doesn't help that sometimes the most innocuous Door request can yield the scariest results.
As a case in point, Millfields has a Door asking you to challenge the perception of societal aesthetics (i.e. get fat and wear something ridiculous). You complete the request and it opens to Twitcher's Curtains, a spacious cavern covered in giant cobwebs that span the entire cave wall (keep in mind that the webs encountered everywhere else in the game are as big or slightly larger than your character). As you approach the treasure, you can see even bigger webs in the background and you get the feeling that something might be back there... Nothing else really happens except for something screaming/roaring at you as you try to leave. Keep in mind that most Demon Doors don't have any music in their interiors, which makes the roar from nowhere even worse. It doesn't help that trying to look back into the cave results in nothing. Everything looks the same.
The Veiled Path. Walking through the sand and up flights of stairs down a long, winding path that is lined with rows and rows of Sentinels. They're just statues, though...which just makes it worse. You're horribly tense, waiting for them to come alive, and their eyes are glowing. But they don't move. They just...don't move. It's almost a relief when a live one comes stomping down at you at the end of the path, though the statues themselves never do attack you.
The Hero's appearance when you become a tyrant in trying to save Albion from the Crawler. Your skin turns pale and your eyes turn solid black. It's absolutely terrifying to see. And the worst part about it? You end up looking like that because you made compromises in trying to save your kingdom.