Horrific situations are found in some of the earliest recorded tales. Many myths and legends feature scenarios and archetypes used by later horror writers. Tales of demons and vampires in ancient Babylonian, Indian, Chinese and Japanese folklore, and tales collected by the Grimm Brothers, were often quite horrific.

Modern horror fiction found its roots in the gothic novels that exploded into popularity in the late 18th and early 19th centuries, typified by Horace Walpole's The Castle of Otranto (1764) as a prototype, and refined by Ann Radcliffe's Gothic novel The Mysteries of Udolpho (1794). A variation on the Gothic formula that remains one of the most enduring and imitated horror works is Mary Wollstonecraft Shelley's novel Frankenstein (1818, revised version 1831). Frankenstein has also been considered science fiction, a philosophical novel or a 'novel of purpose' by some literary historians. At the same time, John William Polidori devised the kind of vampire story that has since become familiar with his short story The Vampyre. This kind of supernatural character, combining evil with sinister charm, has since been much used and elaborated by horror writers.

The first published American horror story was Washington Irving's The Legend of Sleepy Hollow.

Later gothic horror descendants included seminal late 19th century works such as Bram Stoker's Dracula and Henry James's The Turn of the Screw. Early horror works used mood and subtlety to deliver an eerie and otherworldly flavor, but usually eschewed extensive explicit violence.

Other early exponents of the horror form number such luminaries as Edgar Allan Poe and H. P. Lovecraft who are widely considered to be masters of the art. Among the writers of classic English ghost stories, M. R. James is often cited as the finest. His stories avoid shock effects and often involve an Oxford antiquarian as their hero. Algernon Blackwood's The Willows and Oliver Onions's The Beckoning Fair One have been called the best ghost stories. Lovecraft and Sheridan le Fanu called some of their writing weird fiction or weird stories.

Source: http://en.wikipedia.org/wiki/Horror_fiction