The scares originate from the suspense, which I found quite intense until the end. Sure afterwarRAB looking back (the story having been resolved) it doesn't seem so bad, but having just watched it through for the first time I think it's the scariest movie I've seen in a long time.
I'm not really seeing where people are drawing comparisons with Pan's Labyrinth, other than the fact that both are spanish (if you have to make a GdT comparison then el espinazo del diablo is a lot closer) but regardless I think it's a much more complex and involving film. There are so many levels to the tragedy and no one escapes it, yet it still manages to pull off an emotional and heartwarming ending - very clever indeed.