The Devil's Backbone

A beautiful, atmospheric story about a haunted orphanage. To date, I think it's Del Toro's most "complete" film, combining his trademark visuals with a very touching story about war, death, guilt and grief - and ultimately hope.

Like 'Pan's Labyrinth' the story is set against the backdrop of the Spanish civil war (although here the war serves merely as a background noise). The film is so beautifully shot that I would recommend it even to people who don't normally like ghost stories (it does have some scary moments, mind); this one transcends the horror genre. 8 stars out of 10.

In case you're interested in more underrated masterpieces, here's some of my favorites:

imdb.com/list/ls070242495