Having bought Outlast during the winter sales (OMG, $7? Hell Yes, I'll buy!) and having played it some, not yet completed, I'm partially disappointed. I have a strange relationship with scary games and movies. I don't like playing lots of them because I am a coward in most cases, but when I do play scary games, I find it's the initial fear, and that most games don't leave me really scared, just tense.
Outlast sort of reminds me of the Friday The 13th movies in obvious ways, and that disappoints me, because it shows that jumping at the player is just unimaginative. A game I do like (kind of) that did the same things Outlast did, but in a different sort of way was Manhunt. Manhunt was a very tedious slog because snuffing out other bad people for points is quite depraved, but the last level, Deliverance, which has you square off against the chainsaw-wielding Pigsy is quite unnerving, and it's why I love that game.
There is no music, just the soundtrack of a man squealing like a pig whilst a Chainsaw revs, and you are armed only with a stake to drive into his shoulder until his health drops. It freaked me out more than Outlast did, because like most Friday the 13th movies, eventually, you can fight back. Now, I haven't beaten Outlast yet, but the game so far is just hiding from the Doctor, and that's uncomfortable because he's insane, but doesn't portray insane as well as the various patients do.
That being said, I do love the atmosphere the game exudes, but it's more a rollercoaster ride than a psychological one, but I have Silent Hill 2 for psychological terror. Some days you want A Nightmare on Elm Street and other days you want The Shining. I'll say it's well made, though I hope one day a psychological First Person game comes along (Amnesia or Penumbra may be it, I don't know).
I want more psychological horror games, but for what it does, It's reasonably tense and scary in some parts, and if you are like my sister who jumps at every scare, it might be enough, though for me, it's a game that's scary in other spots and not so scary in others.
TL;DR, it's personal preference, but it's not as scary as it could be.
EDIT: Please Delete Double Post, please. I don't know why I had to do Three Captchas before it did the double post, sorry.