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Nightmare Fuel: Jacob's Ladder
Among (many) other things, the opening subway sequence manages to touch on pretty much every single irrational fear a lot of New Yorkers harbor about the transit system.
On a more reality-based note, the prospect of being gravely wounded during the Vietnam War, in the middle of hostile territory, with only a medic tent between you and oblivion.
The shot of the soldier stumbling around with only a flap of skin holding his leg on. Squick.
The scene at the party where Jez is either dancing with or getting molested by some sort of black tentacle. Which nobody else seems to notice.
Even creepier are the extremely brief shots of some sort of wings and teeth you see throughout the scene.
When Jacob opens the fridge to grab a drink, there's a plastic-wrapped sandwich that looks exactly like a dessicated lamb skull.
Jacob's ice bath. He has severe chills and feels frozen, but is forced to go naked into a bathtub filled with cold water, and ice cubes constantly put into it.
The hospital sequence. Jacob is strapped to a gurney being wheeled through an increasingly more dilapidated hospital corridor, passing by random headshaking demons, until he gets to his destination and a doctorish spectre with no eyes (or eye sockets) looms over him with a hypodermic syringe, and Jacob is helpless to escape as the spectre goes to stab him with it. It's pretty much every hospital nightmare rolled into a single surreal sequence.
So petrifying was this sequence, that it inspired the creation of the Dark World in the Silent Hill series. Interestingly, by the end you learn that all those horrible things were just trying to help.
The idea that you can just be living a normal, uneventful life and all of a sudden you're in the middle of pure horror.
There's also a scene where Jacob is hiding in a public toilet and a tissue is pushed through a glory hole at him, and "Dream on" is said again in the same way, but this was cut and can only be seen in the deleted scenes on the DVD.
If you've ever been scared by that effect where a character's head twitches uncontrollably, Jacob's Ladder has inadvertently gotten its Nightmare Fuel on you. They pioneered the effect, and it's been used literally dozens of times since, to varying degrees of effectiveness.
The nurse with the bone sticking out her head. Ew.
If you've ever been subject to frightening hallucinations you'll rarely see a film that captures their atmosphere better than this one. The worst part is the notion that your own mind and your senses are betraying you and cannot be trusted. Your senses are your only filter for the world, and if they go haywire you've literally got nothing.
The Deleted Scene in which Michael "cures" Jacob, and what seems to be the Final Boss attacks - if you get the parallel that this is a rapist trying to get at its helpless victim again, you're spot on.