Here is some information that I remember about horror aspects of the game revealed by lead designers.
There will be true darkness in dungeons and outside during the night. People will need to ignite and carry a lamp or a torch to be able to see in the darkness. Turning brightness or gamma up on the monitor will not help to see through the darkness.
Horror in the game will have mostly Lovecraftian flavor. There will be great old gods like Cthulhu, Haedra and Dagon somewhere on the edge between reality and legends, and cosmic outer gods like Azathoth and Yoth-Sogoth who may cause insanity if some unfortunate person experiences their presence. Developers are promising that presence and agendas of different gods will be far from an abstract concept in the game world. There will also be secret occults and possible rituals or triggers that might unleash something on the world if conditions are right and stars are aligned in a correct way.
Potent magic will come with dangerous risks and could lead to insanity. An archeologist or arcanist who succeeds in digging deep in old ruins and lore of forgotten ages might discover a dreadful grimoire with life of its own. One day someone might even come upon an original copy of Alhazred's Necronomicon.
A transformation system might be implemented to make a few poor souls transform into something less human.
Developers have also revealed that when player characters die, they will be sent to another plane of existence. They must find a mortality gate and return back to the material plane without attracting attention of any beings or entities that exist in other planes beyond the material plane.
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