So The Blair Witch Project made close to a gazillion dollars back in 1999, and suddenly, "found footage" copycats were everywhere. Noroi, Diary Of The Dead, [REC], Cloverfield - everyone wanted a piece of the action. The reasons for this were fairly cut and dry: they were cheap, they were easy to shoot, you could cast relatively unknown actors as your leads and no one would raise a fuss, and better yet, audiences seemed to get a kick out of them, so you had the luxury of making loads of money off of very little. Hollywood, as we've made it abundantly clear, is always looking to replicate its own successes.
Granted, Blair Witch was hardly the first "found footage" feature ever made. The Last Broadcast, about a cable-TV crew on the hunt for the mythical Jersey Devil, was released just one year previous, and might have been a direct influence on Blair Witch directors Daniel Myrick and Eduardo Sánchez when creating their movie. And perhaps the most notorious of these, Ruggero Deodato's Cannibal Holocaust (1980), was banned in several countries for its graphic depiction of tribal rituals in the Amazon Basin (Deodato was later brought up on murder charges by the Italian government, who believed he'd made an actual "snuff film").
What The Blair Witch got absolutely right, which its predecessors only hinted at, was the way it tickled our deepest, darkest fantasies - and invaded our pop culture consciousness. First came the legendary marketing campaign, which started on the Internet and then quietly gathered word of mouth at the Sundance Film Festival and in various college towns; a Sci-Fi Channel TV special, which aired just prior to the film's release; and finally, a limited-screen engagement that became the see-it-or-be-square event of the decade. Then came the movie itself, sold as the real thing, so you felt like an active part of the film's mythology. It was a con, a hoax, and audiences ate it up, hook, line and sinker.