I saw this one in the theaters several times. It came out while I was in college and I remember it being immediately divisive.
The Blair Witch Project follows three film students as they journey into the wilderness of Maryland to film a documentary about a local legend called the Blair Witch. They begin easily enough, with footage of locals giving all the colorful exposition about the various child murders and witchcraft that took place in the area. When they venture out into the woods alone, things start going wrong. Their maps are meaningless, their compass seems to lead them in circles and someone is leaving little stick figure markers outside their tents as they sleep. As paranoia and fear ratchet up, the little group turns on each other and their tattered wills are finally put to the ultimate test when one of them vanishes.
This was not the first found footage movie, however it was the found footage movie that kicked off a generation of lesser found footage movies. The simplicity of the execution is pretty genius. This movie made the audience aware of how limited the information was they were getting from a first person perspective. You scan every inch of every frame looking for monsters or you stare into the black spaces on screen waiting for something to emerge. This is a movie that helps you scare the crap out of yourself. I feel like the people who don't like it (besides the poor motion sickness afflicted) are those who have a hard time putting themselves into the story.
The ending, which I won't spoil, is kind of at the heart of the argument against the movie but I think, if you were paying attention the whole time and get invested in the backstory of the movie, there is nothing scarier we could have seen at the end.