Books: What are we feeling here?

Joe Hill, who looks more and more like his dad every author photo, interviews for The AV Club. It's promo for his latest book, Horns, and it contains an interesting take on the terror versus horror debate. Back before debates about participation awards and top ten lists became the primary fixation of horror blogs, bloggers used to actually spend their time debating points of the genre. One of these debates was horror versus terror. Now a lot of folks packed quite a bit of nuance into their positions regarding the definitions of these two brands of fright, but the cheat sheet version came down to something like terror being rooted in fear of physical harm and horror being a more psychological, uncanny thing.

Hill seems to agree with the widely held definition of terror, but his take on what defines horror is notable for its unique angle:

I was talking to someone the other day who was talking about a line in the new Peter Straub novel [A Dark Matter], which I haven't read. A character in the book’s saying, "What am I feeling here, horror or terror? I think it's horror." There is a difference. Terror is the desire to save your own ass, but horror is rooted in sympathy. It's really rooted in this notion of imagining what it might be like for someone else to suffer the worst. On that level, I suspect that horror fiction is very humanizing.

I'm just now mulling over this bit, so I don't really have a fully formed opinion on it. At first, I liked what I perceived as the clean applicability of it. The two-fold problem with horror in the conventional wisdom definition was that it 1) rested on a nebulous "know it when we see it" appeal to an emotional response that could exist separate from the content and 2) examples of the definition could often be boiled down to the threat of physical harm, suggesting that horror was just anticipated terror. On further consideration, I'm curious whether or not Hill's distinction doesn't mean that all the products of the genre always fall under the category horror and never terror, insomuch as films and books and the like are always mediated experiences through some stand-in (even first-person cinema supposes a character behind the camera who is, at most, a stand-in for the viewer)?