At first I thought it was real, but I was in 4th grade at the time It was the scariest thing to me back then. Then I watched it again a few months ago and it wasn't scary at all
They knew what was going on. They had a rough 38 page (I believe) script which they followed improvising nearly all of the lines. They believed the curse/mythology was real, and only after the film was released did the producers tell them they made it up. They didn't film any of it in there backyards. They purchased cameras at Walmart (which they later returned for a refund), and the 16mm and were dropped off in the forest outside of Bakerfeild (is that the real city name?), taking no more then 8 days to shoot the film. So they only roughly knew what was going on, and simply improvised alot of the dialouge.