One of the big trends over the last few years in the Old-School Renaissance is the turn towards Weird Fantasy. Carcossa, Athanor, Planet Algol, and the late, lamented, World of Thool just to name a few. That last one, Thool, was uniquely interesting in that it's creator passed on some of the most famous sources of inspiration (paging Mr. Lovecraft!) and drank from a less well-known literary well. Thool's drawing from William Hope Hodgson was particularly well-done: the existentially-creepy Weed Men from The Boats of the Glen Carrig.
In that spirit, I'd like to turn my attention to Arthur Machen. Machen was a fascinating writer: a devoted Catholic and a Grail Quester, a Monarchist and a passionate lover of his native Wales, a Victorian born some 50 years too late who repeatedly wrote about horrid sexual practices, and a craftsman of ornate prose who was unexcelled (in my opinion) at evoking nameless dread from seemingly-ordinary reality.
I first became acquainted with Machen at second-hand back in a previous existence as a professional scholar of medieval heresy, magic, and witchcraft. There, I found his name repeatedly linked to the bete noir of witchcraft historians, Margaret Murray. Unless you sturdy such things, you may never have heard of Ms. Murray, but you have almost certainly encountered her central thesis: that the phenomenon labelled "witchcraft" in the medieval and early modern periods was a dimly-glimpsed survival of a pre-Christian, Northern European religion, which survived in an organized form as a sort of medieval conspiracy or counter-Church. Once upon a time, this idea was so accepted that Murray was allowed to authour the Encyclopedia Brittanica entry on "Witchcraft". More lastingly, she was one of the founding mothers of the modern Wicca movement.
Murray's idea incorporated the notion, both attractive and repellent, that the past haunts the present. Machen worked with that idea as well, but rather than pretend to scholarship, he used it to inform his fiction. In The Novel of the White Powder he presents something like Murray's Witch-Cult, but the the result is something so dreadful that it is never quite described. This is a favourite technique of Machen's wherein suggestive phrasing not only adds to the horror (that is, the reader is left trying to wonder what could be so horrible), but alludes to the insoluble mystery of existence (the real world, lying just under our imagined ordinary one, is ineffable).
In stories such as The Novel of the Back Seal and The Shining Pyramid, Machen worked out an idea that had some popularity among the folklorists: British stories of "the Little People" are cloudy memories of short-statured, pre-Celtic inhabitants of the Isles. And in Machen's stories, these ethnological dead-ends are terrifying. Even if you have never read those stories, you might know the idea from Robert Howard's loving tribute, The Worms of the Earth (Howard was a happily acknowledged fan of Machen's work).
Machen's most famous horror story is probably The Great God Pan (his most famous story period is undoubtedly The Bowmen, a tale of a war-time miracle that was so convincing to his contemporaries that it supposedly came true). It's one of his earliest and most Decadent (in the technical sense) and displays his core ideas: a mystical reality invisibly underlying our own own, contact with which lets out the evil within Man. Perhaps his best story, though, is The White People, which may not be horror per se, but which is an amazingly creepy journey into the mystical world through the mind of a little girl. If you have ever wanted to make Faeries the scary, alien things that the ancients thought of (as opposed to Tinkerbells), you must read The White People.
Although both Machen and Lovecraft were writers of Weird Horror and both ably used similar techniques of suggestive allusion, they were also quite different. At the risk of reductionist psychologizing, it is worth noting that Machen was a High Church Anglican, who vehemently disapproved of the stolid, Puritanism to which Lovecraft was heir. In any case, Lovecraft's vision is cosmic and his terror comes from the realization of man's essential, pitiful smallness within the vast cosmos. Conversely, Machen's vision is decidedly terrestrial and terror proceeds from the realization of the horribleness that resides within Man. It is humanistic, but in a strangely distorted way. Although the actualization of Man's inner evil might provoke a physical transformation (the stunting of the aboriginals or the indescribable bodily alteration in The White Powder and The Great God Pan), these things are still human - are still us - in a way that no Old One ever could be (you might argue that HPL was doing something the sort in The Shadow Over Innsmouth, but I think that would be wrong).
If you haven't read any of Machen, then shame on you. It's not too easy finding copies of his works as he has not been republished in the manner of Lovecraft, or given the limited, but royal treatment afforded to Hodgson. Still, Machen is worth the effort. Even though the revelations contained therein may...change you.