It's the 'Purple Rose of Cairo' of horror movies! As someone else correctly pointed out, the set design, lighting, and sound design is excellent. Many of the scares are not scary, but some of them are.
A horror by way of De Palma's Blow-Out, in as much as it deals explicitly with the idea of investigating the image as self-conscious critique of the way audiences now experience films. Here, the power of the image becomes a supernatural one. While the domestic scenes are fairly strained, the first shot is one of the most powerful in recent cinema; establishing an ensuing tone that is genuinely unsettling and intense.
Looking beyond the dumb character decisions and very poor ending, Sinister provides some genuine frights. The snuff films themselves are quite chilling, while the sound design is what really shines here - haunting and mesmerizing.
The classical Stephen King-like setup of a writer in retreat working on a new novel, combined with "eyewitness procedurals" like Coppola's The Conversation or De Palma's Blow out, and benefited immensely by Ethan Hawke's disturbed performance. A shame about the third act, when the initial subtle and creepy atmosphere is thrown away in favor of low rent and silly trickeries.