I'll first start off by saying that this film isn't going to be for everyone. If you disliked The Blair Witch Project, Cloverfield, or mockumentary horror films in general, then you probably won't care for this one either. I actually think it improves on some of the flaws of the aforementioned two films (as much as I loved them) beginning with the toning down of the Nausea-O-Vision from the camera, but I can't guarantee that that'll improve the overall film for everyone else.
As for me, the film was everything I wanted and more. I love horror that's built off of the smallest of occurrences as the sounds of footsteps or lights being inexplicably turned on and off--they say more and stir up more of a reaction than a person graphically killing another can, in my opinion. I also loved that it cut to the chase about the couple's main intent with the camera as soon as it turned on (rather than letting them have fun with it first and then get serious) as well as the skips in time it'd take between one to several days if nothing happened. Made the camera usage more believable. The acting, too, was very believably done, never getting too over the top or too subtle that you can't buy into it. The buildup to the ending was just terrific--I've heard some mixed responses to the ending itself (or at least the ending I got) but I thought it was perfect.
Paranormal Activity also gave me one of the best theater experiences I've had in a while. I was pessimistic at first as the theater filled with chatty kids around my age, anticipating a lame MST of it from them, but by the time the previews were over, they, too, settled in for the ride. There were laughs (of both the amused and nervous varieties), gasps, curses, and a collective scream at the end.
All in all, great movie, great time.