Alright . . a few sentences :
Taking place in a larger western city, the protagonist prisoner is held in the city jail for years. He escapes one day to find the entire town has been overtaken by zombie-like (smarter) creatures, horrors, and maybe demons (he's not sure what they are). He follows a mix of clues that lead him through the town until the end of the game, when he finds out that he is clinically insane. All the horrors are actually people, and he's actually seen as a serial killer. The protagonist kills himself, screen fades to black.
Expanding upon this : As the character grows more insane (as the taint spreads throughout the city as the player will view it), buildings begin to morph into gothic like western structures, pulse, and are just creepy in general. Maybe there are a few close town together to aid with story development (obviously the player can't talk to people in the given town he is in most cases).