If best horror game, as in the most scariest I've played, and I think it can be considered this generation, since it's on the Xbox 360 and PC is Condemned: Criminal Origins.
That game was terrifying, and more than Silent Hill, because it was an FPS, and I generally think FPSs are more scarier than third-person adventure/shooters.
Also, it was scarier than Condemned 2, since Condemned 2 went down the whole demonic thing that, for me, diminished the scariness, plus in Condemned, you couldn't run. Or punch.
But you had a taser.