The term "creepypasta" is fairly elastic, covering a lot of Internet short fiction and manufactured urban legends - a notable example being the "Slender Man," which began as a set of clever Photoshops inserting a tall, disturbing humanoid figure into mundane pictures of kids at play, and grew into an urban legend about a possibly extraterrestrial stalker. (Slender Man then got commercialized, even receiving his own video games.)
But the purest expression of the creepypasta art form is an entirely new form of horror fiction: a tale told in seemingly realistic manner through emails and forum posts. Sometimes the creators will sign up under a number of different aliases at a Web forum, creating the illusion of a group of unrelated people discussing some eerie phenomenon. It's basically an elaborate hoax, carried off so well that you can't help but applaud the effort when reading the finished product. At its best, creepypasta has the same air of legitimacy that the early found-footage movies did, particularly "The Blair Witch Project," which could even be described as creepypasta in cinematic form, since its marketing was boosted with Web sites that made the film out to be a documentary about a group of students who really disappeared while researching an urban legend.