Movies generally don't scare me. Suspiria does, only because of the incredible soundtrack. And Abbott and Costello Meet Frankenstein used to scare me when I was little, because I always thought something was going to change during the scene in the woods with the wolfman, and that he would actually kill Wilbur. (Not that I would care if he got him now. I love Abbott and Costello as a comedy team, they were genius. But I'm not particularly fond of Lou. Bud was great, though.) So when I say that In the Mouth of Madness makes me lose sleep at night, it should be taken seriously.
The film, as many people would agree, is mostly a tribute to H.P. Lovecraft's work, from the title (a play on Lovecraft's At the Mountains of Madness) right down to the Cthulhu cutouts you'll notice scattered throughout the movie.
I'm going to try to explain this correctly...In the Mouth of Madness deals with mass hysteria/insanity. After reading books written by Sutter Cane (Stephen King, anyone?), fans of his work become violent and start going insane. Cane goes missing, and John Trent (played by Sam Neill, and I swear to God, that is NOT the only reason I love this movie) is hired to find him. His search leads him to a town called Hobb's End...It's the town Cane writes about in his books, and it doesn't exist on any map. And from there, you really start to see how Lovecraft's work inspired Michael De Luca while he was writing the screenplay.
This may or may not be true, but you could also assume that Carpenter was making fun of the people who insist books, movies, music and video games are the reason that people commit violent crimes.
In the Mouth of Madness, in its entirety, is on YouTube. But I would recommend buying it, as the DVD is incredibly cheap for some reason. I guess not many people have heard of it. (There's always the possibility that they're just not interested in it, but I imagine if more people knew of the movie, they would be interested in it.)
After watching In the Mouth of Madness, you can go to the official website and take a look at what the books Cane wrote were about. No, they aren't real books. However, they're still worth seeing. Click on "The Feeding" first (Cthulhu shows up on the cover), as it explains why there are several scenes in the film where kids are chasing a dog. It's probably not a huge revelation, but it's nice to have your suspicions confirmed.