Hands down the scariest book I have ever read is Stephen King's "IT".
I remember reading it for the first time when I was in high school. It is the only book I have ever had to actually stop reading for a couple of days because it was inducing nightmares.
But I love, love, love reading any kind of horror - and the classics are wonderful: Mary Shelley's "Frankenstein", Bram Stoker's "Dracula", Poe's "The Tell-Tale Heart" - those are still some of the best pieces of literature (horror or otherwise) that I have read. Especially "Frankenstein".