I just came across a few concepts that are no doubt familiar (at least in literature and psychology), but it is nice to make explicit for gamemastering:
Terror is usually described as the feeling of dread and anticipation that precedes the horrifying experience. By contrast, horror is the feeling of revulsion that usually occurs after something frightening is seen, heard, or otherwise experienced. It is the feeling one gets after coming to an awful realization or experiencing a deeply unpleasant occurrence.
People thinking about Gothic fiction have a lot of (divergent) views on this. But I think from a gaming perspective the above distinction is useful.
It is much easier, in my opinion, to create a feeling of terror than outright horror. Many roleplayers have seen, read or played enough stuff to be a bit jaded ("oh, *another* horribly warped corpse...") and coming up with something to make the queasy is a bit of a challenge.
But it is possible to build a sense of dread: hints, uncertainty, small, odd details, things that don't add up. Ann Radcliffe claimed that "Terror is characterised by "obscurity" or indeterminacy in its treatment of potentially horrible events; it is this indeterminacy which leads to the sublime." So instead of keeping the nature of the threat clear, or even if there is a threat in the first place, we should keep things ambiguous: there *might* be an exsurgent outbreak, but maybe that strange man is just schizophrenic. The Factor might be threatening the PCs, or it is just a bad translation. There is a foul odour in the air, but maybe that is just due to a malfunction in the environmental preferences setting, or even a prank... or a decomposing corpse hidden somewhere that the habitat AI claims exists but strangely cannot pinpoint - maybe it is the AI who is mad.
Another good trick is to know something bad is going to happen soon, yet the victim is unaware of it. Suspense rather than surprise. The classic method is of course the countdown (the habitat is in orbital decay and will soon hit the atmosphere, there is a bomb ticking), but it might be even more effective to have the players know something a group of innocent NPCs don't. So while the sentinels are trying to prevent a glob of self-replicating goo from hitting a hab dome the gamemaster described the everyday family life going on inside, clearly willing to describe the horrors that will happen if it hits.
In science fiction there are usually ways of finding things out - scanners, search engines, the scientific method. That tends to defuse suspense. But one can easily turn it around: the tools might give ambiguous results. Something is interfering with the scanner; the mesh search comes up strangely empty-handed or with hints of something horrible; the character investigating realizes that there are a few different unpleasant possibilities, and he cannot tell which is the true one.
Of course, Stephen King had a good point: "I’ll try to terrify you first, and if that doesn’t work, I’ll horrify you, and if I can’t make it there, I’ll try to gross you out. I’m not proud."