Why can a grubby minute of found footage shake you up more than a million dollars' worth of digital wizardry? It's the difference between realism and simply looking real--a distinction the Lucasfilm era never seems to grasp. From Mélies to Harryhausen to ID4, every generation has upped the ante on film technology, demanding special effects that won't stop fine-tuning until flying saucers are as prosaic as oven mitts. Yet big-budget effects sequences are now so ostentatious that they're instantly pegged as film craft--and hence blatantly fake.

Whereas a wobbly, unedited piece of camcorder footage exerts a grim fascination, as if you'd stumbled upon a document too raw and mundane to be doctored. The difference helps explain why a grungy, technically ragged genre piece shot mostly on video is the most disturbing horror movie in years, while a megabudget Hollywood spookfest in simultaneous release stumbles over its own moneybags.

The Blair Witch Project and The Haunting belong to the same basic campfire-tale tradition: A small group enters a remote area against all warnings, only to fall victim to a spooky local legend. (If you want to enjoy Blair Witch to the fullest, stop reading now.) Where they differ is in scale. The Blair Witch Project wrings more scares out of a pup tent than The Haunting manages in an entire computer-generated funhouse, thanks to unfashionable virtues like character detail, long takes, and a largely unseen menace.

Conceived and directed by Daniel Myrick and Eduardo Sanchez, The Blair Witch Project opens with a credit that says in October 1994, three filmmakers went into the woods near Burkittsville, Md., to shoot a documentary. A year later, their footage was found. The movie's conceptual masterstroke is that this is exactly what we're seeing: hand-held video and 16mm footage shot by Heather Donahue, Joshua Leonard, and Mike Williams as they tromp through the woods, searching for the fabled Blair Witch.

Some reviews have slagged the movie's draggy first half, which consists mainly of rambling conversations and endless hiking. Yet the cruddy sound, shaky filming, and flat dialogue only add to the movie's credibility: Who'd bother to make up this much ennui? The Blair Witch Project uses its (seeming) lack of narrative structure to unnerve an audience familiar with horror-movie conventions. By the time the three protagonists find their campsite strewn with occult symbols, we're as freaked out as they are--especially since the actors give an all-too-convincing demonstration of group dynamics in utter meltdown.

The Blair Witch Project makes a virtue of its every low-budget limitation: Its scariest special effect involves nothing more high-tech than sticks and twine. In this regard, the movie resembles Robert Wise's 1963 chiller The Haunting, an effective haunted-house yarn that leaves its darkest demons to the viewer's imagination. In the 1940s, Wise worked with legendary horror producer Val Lewton, who emphasized sound and shadows over special effects, and he used every trick he learned from Lewton in The Haunting. One scene in particular still terrorizes viewers: a door bulging under attack from some deadly hidden force.

That scene is reprised in Jan de Bont's grandiose remake--only in typical fashion, the door is now the size of the 2001 monolith, and the room could house Winchester Cathedral. If The Blair Witch Project converts its no-budget liabilities to strengths, The Haunting wields its resources the way a swimmer wears an anvil. The plot concerns a psychologist who spirits some susceptible subjects away to a deserted mansion, the better to record their responses to fear. Trouble is, there's plenty to be afraid of--loud noises, slamming doors, a rickety staircase waiting for victims.

The credited author, David Self, seems to have read a screenwriting book upside-down--he brings in useless characters and sends them away again for no good reason, and he places the characters we care about least in the gravest danger. But the director, Jan de Bont, dooms the movie to unintentional hilarity with absurd digital effects, from mobile statues to windows that sprout giant hands. What's more, the Hill House set is so elaborate and distracting that it dissipates the suspense; it's too huge even to provide any atmosphere.

The Haunting ultimately sinks under the weight of the film-packaging baggage that The Blair Witch Project shakes off. Sadly, that includes its overqualified cast. In horror movies, familiar actors are less effective than unknowns. Carnival of Souls, Night of the Living Dead, The Texas Chainsaw Massacre--these films are all the more authentic and disturbing for their low-budget crappiness and the absence of a hierarchy of stardom. You can't look at Night of the Living Dead's cast of nobodies and spot the survivors--or The Blair Witch Project's, for that matter. The Haunting, on the other hand, starts out with Liam Neeson, Lili Taylor, and Catherine Zeta-Jones--the kind of big names you can expect to stick around through Reel 3.

The Blair Witch Project also cannily plays on a backlash against the oppressive new technology of movie magic that The Haunting embodies. More than 100 years ago, when the Lumi¸re brothers projected footage of a train chugging toward the camera, the audience leapt out of its way. Now we're so accustomed to viewing that we don't jump even when the train is real. To get our thrills now, we look for the trappings of amateurism: the grainy, accidental look that professional filmmakers learn to avoid. Thus the camerawork in The Blair Witch Project is most effective when it's aimed at the wrong spot: The trembling field of vision reminds us of the terrified human being peering through the lens.

The most persistent criticism of The Blair Witch Project is that Heather continues filming even when common sense says drop the camera and run. But it's worth remembering that camcorder footage of the tornado. The camera's view made the twister look like a special effect--and if we're watching it on TV, it can't be happening to us. During the blood-curdling ending, we know exactly what Heather wants to see: overblown special effects and Catherine Zeta-Jones, which would prove that she's in a dumb horror movie. Unluckily for her--and luckily for us--she's not.