Ever since Blair Witch Project, and despite a gap directly following its release, the handheld-style "this is real footage because it's so crappy" genre has found a niche with moviegoers. They aren't all good films, but sometimes worthwhile. Paranormal Activity pretty much falls into the latter category; it wasn't great, but it had some clever effects and suitable creepiness.
The biggest problem for a film of this type is disconnecting from the viewer - when they can no longer believe that it's "real" because of a flaw in the writing/photography. Unfortunately, that happens early in this movie and I was not able to get engaged again for the remainder. When a scene is put on film for the sole purpose of advancing the narrative, not because a normal person would film it, it poses a problem. When a camera is miraculously pointed at the focus of the shot even though no sensible person would be holding it like that, it poses a problem. These are the sorts of pitfalls these films deal with, and while I don't have a solution, I think they can be avoided, perhaps by discussing events occurring off-screen during other scenes that are legitimately on camera.
There are good things to say about the movie. The acting is solid, and one feels like the relationship being played out on screen is real, if a little over the top. There is a degree of caricature to be had, especially in the male lead Micah, but without that I suppose the last act would not work as well.
I read another review that scoffs at there being any suspense in the film, because you always know that a) when they go to bed, SOMETHING will happen, and b) usually around the same time - say, when the fast forwarding stops. What you don't know is what specifically will happen, and because of that, there is still some suspense. I think that because of this routine, the linear progression of scares is less effective. The viewer is already thinking "OK, something a little weirder will happen tonight", and then it does.
Beyond the disengagement, there are a few other problems with the writing such as scenes with no follow up and an annoying tendency to keep everything going on to themselves despite the ridiculous lengths to which the haunting entity goes to freak the couple out. I mean really, you should probably call SOMEONE after phantom bite marks appear on your body. Considering the enormous amount of video evidence they have of something really strange happening, it's never once shown to anyone else. That just seems sloppy.
It was brought to my attention that there are 3 endings to the film, two of which were originally used at festival screenings (but have made their way onto discs, apparently) and the theatrical ending, which was proposed by Spielberg himself. The one I saw seemed, I guess, to be the most "realistic" in the context of the events unfolding, and after hearing about the theatrical ending, I think I prefer the one I saw. The third, however, sounds the most disturbing, and that might have been the best for that reason.
Scariest movie of the last 10 years? Hardly. It had me a little jumpy going out into the dark hallway immediately after watching, but once it loses you - and it will - it fails to bring you back.