Okay, for the noobs. H.P. Lovecraft is famous (or infamous if you're a religious zealot) for the Cthulhu Mythos, which revolves around ancient beings known as the Elder Gods. Cthulhu is more or less the most powerful of the bunch. It is said that to gaze directly upon Cthulhu is to know true madness. Speaking of madness, Lovecraft was one of the first writers to incorporate a psychological element to horror, and one of the only writers to be truly original whenever he dabbled in monster horror. Sometimes he would seem to combine the two types of horror (a bit like Silent Hill 2 did), making it a bit unclear as to whether these monstrosities actually existed, or if they were simply the product of a madman (who is probably the story's protagonist). If you've played the Legacy of Kain series (particularly the bits of it where you play as Raziel) or read a Hellboy comic, you'll see the kind of impact that Lovecraft has had on modern horror. It's just a shame that the media and the world in general continually fail to give him credit for it by say... making Shadow Over Innsmouth into a movie (I know they made a game based on it, but it was so poorly advertised and so buggy that almost no one managed to play it, let alone beat it).
I would also like to give noobs a warning here. Lovercraft is one of the most verbose little buggers you'll ever read, sometimes this works to his advantage and sometimes it doesn't. And, while yes, some of the things he writes are pretty damn racist, just remember that he grew up in, and wrote during a time in which that sort of behavior wasn't considered a problem. I'm not making excuses for him as much as I am telling you to completely ignore his racist statements, because A) He's dead, so what the hell can you do about it? and B) I'm not entirely convinced that he actually believed in these statements; I tend to think that he simply put them in there to shut up the only publishers that would accept his work at all.