What is horror?
I can't give you an absolute definition of the term because, like all abstractions, the term 'horror' is experienced differently by different people. What I can say is that in general it is a strong emotion, usually accompanied by disgust, distress, and aversion: that it frequently evokes the fight/flight adrenal reaction, and that involuntary exposure to actual (as opposed to simulated) and unavoidable horrific phenomena may result in long-term post-traumatic stress symptoms.
And then there's horror in fiction, which is something else.
My take on horror is that it's a tone; you can add a tint of horror to any other genre. Horror goes well with SF ("Alien"), with fantasy, with crime, with thriller, with romance, with literary realism, with just about every flavour. It's the monosodium glutamate of fiction. We add it because it's a contrast-enhancer.
Fiction may be about the study of the human condition, but the human condition under the mundane constraints of ordinary life lacks jeopardy and the attraction of drama. We attend to the dramatic because it evokes high emotions and (if you go by Aristotle) a sense of catharis, of release of tension, with the climactic resolution of the source of these emotions. Horror is a pretty extreme emotion, so evoking it gets us out of that everyday anomie pretty easily.
Furthermore, if applied correctly horror is an emotional cattle-prod that can drive all of us to empathize with the victim. Other stimuli are more ambiguous, and therefore more liable to fail. Love at first sight can easily trip up the reader if they look at the object of desire and wonder what the besotted viewpoint can possibly see in them; middle-aged restlessness seldom holds much interest for young adult readers. On the other hand, nobody looks forward to being pursued and eaten by zombies, slaughtered by serial killers, or being abducted and forced to write one more sequel to their best-selling series (unless there's a seven digit advance attached to the contract).
I will confess to using horror freely. I've got an entire series out there which, arguably, consists of horror (the Laundry books and associated stories) — horror layered on top of humorous pastiches of various British authors of spy thrillers (at least in the novel-length iterations). If you're going to use humour, it can very rapidly spin off into irrelevance unless you ground it somehow: a bit of horror goes a very long way towards keeping a humorous work from feeling light to the point of irrelevance. It makes a most effective contrast agent. Perhaps more usefully, a small dab of carefully-applied horror can force us to reconsider some dramatic conceit that we may have been tempted to take too lightly. (That's the role of the Toymaker's "sample" in "Rule 34": to jerk the reader out of any empathy for him that may have been sneakily installed in their heads by following the narrative from his viewpoint.)
There are, however, a couple of serious drawbacks to the use of horror. For starters, if over-used the readers can become habituated to it, to the detriment of the overall plot. If you've kept your characters wading through gore for five hundred pages, it's very hard to lend sufficient weight to a sensitive interpersonal denouement; similarly, if you've done the tight-and-narrow focus horror trick of magnifying a small-scale and very ordinary tragedy into something that fills the silver screen of the reader's imagination — waiting for the results of a hospital lab test, say — then you risk bathos when you snap the focus back to wide-angle. More subtly, certain types of reader respond to horror as if to an excessively strong chilli pepper; you risk losing a chunk of your audience if you push the revulsion button too hard. And finally, certain types of story just don't work with horror (although I confess I'm having difficulty thinking of a canonical example).
Do you read horror? If so, why?
Scary Monsters (and Super-Creeps)
What is horror?