I think it depends on the type of story. A 'stock' story, like vampires or werewolves would never work if you never saw the bad guy, and 'stock' ghost stories would never work if you DID see the bad guy! So I think that's the first thing to establish.
But really, whether you see or don't see the monster in your horror, it's all about suspense. A lot of horror doesn't show the monster early on, or it uses a series of revelations of the monster, but to different people each time, so that you can effectively build the tension over and over and not lose the impact the monster creates.
Two of my favourite horror films are Alien and Event Horizon - in Alien you see flashes of the monster and it's fairly well into the film before you see it in all its glory. Then it appears and disappears quite regularly, but the tension is built every time before a revelation - or even if there is no revelation, just to keep the viewer on edge. This makes great horror.
In direct contrast is Event Horizon - there is no monster per se, but something alive in the ship - or the ship itself is alive - which drives the crew insane and causes them to kill themselves and each other. This cleverly uses flashbacks from characters' memories, not in themselves completely horrifying - but in the context of the movie, truly creepy.
In Stephen King's Needful Things, nothing horrific is really revealed until near the end, but there is a constant sense of building tension that makes us cringe to turn the page. Innocent things become evil, dramatic tension is built because we know things that the characters don't, we know they shouldn't accept the gifts that they do accept and what will happen if they do, but the characters themselves don't know, and this is what makes for great writing, great reading, and great horror.