I wish someone would make a new System Shock. Number 2 really is one of my favorite ever games. As far as space horror goes I think that Dead Space 1 and 2 got close, but there was just something about that game that got me. The story was fantastic, and obviously there is SHODAN the terrifying AI. Hearing her voice still gives me the heebe jeebies. Although the graphics are pretty dated, I think this is a great example of how an immersive world can suck you in, and your imagination just fills in the gaps. Well, mine did anyway.
"Look at you, hacker: a pathetic creature of meat and bone, panting and sweating as you run through my corridors. How can you challenge a perfect, immortal machine?"
Also, this: I Have No Mouth, And I Must Scream