In 1962, a coal fire started under the town of Centralia, Pennsylvania. Only a few people continue to live in the town, as the fire still continues to produce clouds of gas and has been condemned. This has lead people to call the town "The Real Life Silent Hill", as the appearance of the gas gave off the same visual appearance of the mist in the Silent Hill games. However, the town shows very few signs of the underground fires continued existence barring a number of warning signs and a few gas vents.
The monsters seen in the Silent Hill series are manifestations of the inner thoughts and fears of the games' characters. This explains why you rarely see the same exact monsters in different games.
It is speculated that the fog effect was originally used due to hardware limitations in order to cover up the poor draw distance. The effect was well received, and become a recurring element in the series.
Most Silent Hill games have a secret UFO Ending, achieved by doing certain feats during the game.