In 1988, the Wyrick family moves into a new home, which was mysteriously abandoned by the previous owners. Shortly afterward, their four-year-old daughter Heidi begins spending time with an imaginary friend, a kindly old man named Mr. Gordy. Several months later, Heidi is frightened by the appearance of a man at the front door. The man, whose hand is wrapped in bandages and shirt covered in blood, introduces himself as "Khan", but upon investigation, Heidi's mother is unable to find Khan, and dismisses him as a figment of Heidi's imagination. However, shortly after this event, Heidi begins to see images of "the Dark Figure", a man whose face is obscured by a hood. The family eventually realizes there's more to the Dark Figure than just a child's active imagination, after Heidi awakens one night with claw marks on her face; shortly after this incident, her father Andy suffers the same scratches on his side. The entire family soon grows to fear the Dark Figure, although for a long time, Heidi is the only family member who ever actually sees him.
The family contacts William G. Roll, a parapsychologist. Dr. Roll's instruments indicate an unusually high concentration of positive ions in the house, and his research reveals that the house lies near a fault line; an earthquake has created a magnetic field in the area. He therefore explains the haunting as hallucinations caused by the ions creating minor interference with the family's brain function. This explanation is noticeably more scientific than is usually offered in episodes of the series.
However, further research reveals that a kindly old man named Gordy used to serve as caretaker for the property, and that a man named Lon (which Heidi misheard as "Khan") once lost his hand in an accident nearby; photos of both men match Heidi's descriptions, even though they both had died decades before Heidi was even born. In light of these developments, Dr. Roll amends his theory, and explains that the family, especially Heidi, is genetically predisposed toward psychic abilities that allow her to detect "place memories", energy left behind by past events and people that have been "recorded" into the environment. However, Dr. Roll maintains that these are natural conditions, and are neither dangerous nor paranormal in nature.
As years go by, the hauntings become more disturbing. The kindly Mr. Gordy appears less and less as Heidi grows older, until he eventually disappears altogether. The terrifying Dark Figure, however, appears more frequently, and Heidi is no longer the only one who sees him. The ghost of a little girl also appears to several family members. In addition, voices and other sounds disturb visitors to the house and the entire family (even members not living in the house). Dissatisfied with Dr. Roll's explanation, the Wyricks consult two psychics, who independently claim to detect several spirits in the home, some benevolent and some evil. The psychics disagree, however, about the nature of the evil spirits; the first psychic, Amy Allan, does not believe in demons, while the second psychic, who attends Mrs. Wyrick's church, agrees with Mrs. Wyrick's assumption that the evil spirits are demonic. In response, the Wyricks turn to their church for help. The pastor's prayers for the family temporarily put their minds at ease, although when they return home, they realize that, regardless of which explanation of the hauntings is accurate (hallucination, place memory, ghosts, demonic activity), their faith can serve as a comfort, but not as a means of ceasing the hauntings.