The horror genre has been around practically forever - what are the tales of the Medusa in Greek mythology or the tales of the Bothers Grim except stories meant to evoke fear?
Considering all of history, who is it that makes you leave a light on when you go to bed?
For the purpose of this discussion, I'm not considering ultraviolent films such as Saw and The Hostel. These really belong to an offshoot genre. If you disagree, feel free to state why you feel they belong to the horror genre.
In my own opinion, the mid seventies to the early eighties was the best decade for horror. Films such as Alien, The Thing, Hellraiser, The Howling and more (so many more) set a bar which, I think, has yet to be surpassed. Especially given how remakes and sequels have become so commonplace and so awful.
As to the best of all time, I'd give that honor to John Carpenter. The Thing was the first movie to really, really freak me out. Although there are some blemishes on his record (Escape From LA, I'm looking at you), he'll always be the guy who made me believe paranoia is real.