The film opens with a character in a video game entering an eerie mansion. As the character explores, he is unknowingly stalked throughout the mansion by a woman in a blood red dress. When he notices the woman approaching him he attempts to flee up the stairs of the mansion, but the red-clad woman knocks him off the staircase banister, and the character is killed when he is hung by a chandelier chain.
The player of the game, Loomis Crowley (Milo Ventimiglia), quits playing and calls his friend Hutch (Jon Foster) to see if he would come over and play the new game with him, revealed to be Stay Alive. Hutch tells him that he is not in the mood right now, and they will get together that weekend to play and the friends hang up. Loomis goes upstairs and finds his room-mate having sex and tells them he found them dead in the game. Loomis' room-mates brush it off and he leaves to bed. Loomis is woken up by a strange nightmare and goes downstairs for a snack. He is confronted by an unknown assailant and runs back upstairs only to find his room-mate slaughtered, with the walls bloodied. He backs away horrified and a chain is clasped around his neck and he is knocked off the staircase banister and hung on the chain, the same way he died in the game.
The next day at work, while talking with his boss and friend, Miller (Adam Goldberg), Hutch receives a phone call informing him that Loomis is dead. At the funeral, Loomis' sister, Emma, gives Hutch a bag containing some of Loomis' possessions, including some video games, as well as Stay Alive, where it is revealed that Hutch was adopted by Loomis's parents. At the funeral, a blonde girl named Abigail (Samaire Armstrong) introduces herself as a close friend to Loomis's room-mate, and they part on good terms.
After the funeral, Hutch goes to an internet cafe owned and operated by his girlfriend and best friend, October (Sophia Bush), and her brother, Phineas (Jimmi Simpson). Hutch hands October the bag containing Loomis' possessions, and Phineas eventually finds the video game, Stay Alive which they decide to play as a group that night.
That night, another friend of Hutch, Swink (Frankie Muniz) arrives at Hutch's house, followed shortly by October, Phineas, and Abigail and they begin setting up their gaming equipment to play Stay Alive. Later, when everything is ready, they start up the game, with Miller playing online from his office. To start the game, the players recite a passage, "The Prayer of Elizabeth", during the game’s intro, which they say out loud (voice-recognition game), surprised by the game's advanced technology. After a few hours of gaming, in which October realizes that spirits in the game cannot cross wild roses, Miller’s character is stabbed in the throat by the same woman in red who had killed Loomis. The group then decides to call it a night, but as Miller prepares to leave his office, his joystick drops down the table. As he goes to pick it up, he is killed in the same way as his character.
When Hutch returns to work the next day, he is informed of Miller’s death and questioned by two detectives, Thibodeaux and King. Afterwards, he returns to the Internet cafe, joining his friends, while Phineas is playing the game, where he notices that the woman in red hates mirrors. Phineas' seeming insensitivity over Miller and Loomis' deaths cause the rest of the group to leave, while Phineas continues the game. While talking with the group, Hutch makes connections between the deaths of Miller and Loomis and their characters and runs back to the cafe to stop Phineas from playing. When they arrive they find Phineas, instead getting high, having paused the game before he was killed.
After doing some research, Hutch calls everyone together to reveal he knows how people are dying. October then says she believes him and reveals all she knows about Elizabeth Bathory, the woman from the game. Bathory would drain young women of blood, bathing in it to maintain her youth, and could not stand to look in a mirror as she hated to see herself grow old. Hutch then notices Phineas' absence. As Phineas drives to meet with the others, a spirit appears in front of his car causing him to stop onto the side of the road. The group calls him and learn of his situation, telling him to stay there and that they will come and get him. Shortly after the call, however, he is run down by a bizarre horse-drawn carriage.
Arriving at the scene, the group mourns the death of their friend. Thibodeaux and King arrive on the scene, and King decides to play Stay Alive, despite Hutch's attempts to stop him. Thibodeaux informs Hutch of his connections to the murders and that he is becoming a suspect. In the game, King's character’s jaw is ripped in half before Hutch can shut the game off. October, Hutch, Swink, and Abigail all decide to find a way to put an end to the games curse. Later, while investigating the game himself, King goes to a local game store, but finds no information. He goes to his pick-up truck, only to see a horrified spirit in the back mirror, which rips his jaw open and kills him.
Hutch and Abigail decide to go to Loomis's house, where Hutch reveals to her his fear of fire, stemming from his father murdering his mother by setting their house of fire with her asleep inside, and he almost was burned in the fire, and was then adopted by Loomis's parents. They find the address of Stay Alive’s developer, Jonathan Malkus (James Haven) hidden in Loomis' computer. They proceed to go to his mansion, and, assuming no one is home, they go in. While exploring the house, finding dolls of Bathory and a black carriage in the barn, they are confronted by Malkus. They explain to Malkus the deaths and their connections to his game. He is shocked about the events and tells them that the game is based on the legend of Elizabeth Bathory. He sends them to a local author who wrote a book about Bathory called The Lady of Blood.
Hutch and Abigail meet the author in a cafe and she tells them the legends of Elizabeth Bathory. They learn that she was walled up in the tower on her plantation as punishment for her gruesome acts, vowing to one day return and seek revenge on all men, women, and children, by her hand. Abigail inquires as to whether or not Bathory could be summoned and the author rebuffs her, telling them both that she hopes they know better than to toy with the evil spirit of the undead Elizabeth Bathory.
Meanwhile, October and Swink are doing investigating of their own. October calls Hutch and informs him the only way to kill The Countess is by burning her body, after first trapping her soul in her body by driving three nails into her: one in her heart, one in her throat, and another in her head. Swink then announces, after seeing a newscast, that detective King is dead, and that the group are now suspects. They all flee, meeting at Loomis’ house to formulate a plan to stop Elizabeth Bathory.
October goes outside to smoke and sees Bathory in a house under construction. Entering the house alone, she tries to confront the Countess in revenge for the death of her brother. Grabbing a nail gun, she attempts to fire the nails in The Countess. Unfortunately the nails must be put into her physical body and not her spirit. October attempts to flee but The Countess clasps her ankle with a chain and lifts her up, slitting October's throat. The others arrive to late, with Hutch cradeling Octobers body, mourning inconsolably. After they leave, Hutch informs Abigail and Swink of his belief that, by reciting "The Prayer of Elizabeth", they inadvertently summoned her vengeful spirit.
They all decide to investigate inside Malkus’ mansion with Swink deciding to stay behind and play the game as both a distraction for The Countess, and as an aid to the others. Hutch and Abigail go inside the mansion, where they find various clues about The Countess, revealing that Malkus's house is actually the Bathory plantation. Swink also reveals, through testing, that whatever happens in the game will happen in the real world. Abigail finds Elizabeth's diary in a secret room, revealing it is full of the names of all the girls Elizabeth killed in her lifetime. The spirit of Bathory traps Abigail and is about to kill her when Hutch saves her with the help of Swink via the game.
Meanwhile, as Swink plays, he realizes that the Countess is after him, and she is cheating, since he hasn't died in the game. He starts to run, chased by the carriage, and lands in the bushes, and Bathory steps out, seemingly killing him. After a run-in with The Countess’ black carriage, which they survive by collecting several wild roses, Hutch and Abigail locate Elizabeth’s altar in a large Mausoleum, which leads them to an underground entrance to Bathory's black tower. After escaping from several spirits of Bathory's victims and then Bathory herself they arrive at the door to the tower. Hutch enters and suddenly, the door slams shut leaving Abigail trapped. Hutch panics and tries to open the door, but she pleads with him to go ahead, as The Countess closes in on her. Hutch leaves her with a rose to protect her, and proceeds on without her.
When Hutch reaches the top of the tower, he finds The Countess' body completely preserved. He hammers in the nails, trapping her spirit in her body just as she is about to kill Abigail. Now back in her body, the Countess attacks Hutch. He uses the reflective surface of his laptop as a mirror, showing The Countess her reflection, which drives her mad. Hutch then manages to set The Countess on fire, but is trapped in the room as it begins to go up in flames and his fear of fire begins to overtake him. As all seems lost, Swink and Abigail burst into the room carrying a small rose bush, Swink having survived due to stumbling into the roses while being chased by The Countess. The three of them then proceed to leave the plantation as Elizabeth's body burns.
In a video game store, it is shown that Stay Alive is being released. An employee takes a copy, puts it in the PlayStation 2, and as the game begins the group reciting Elizabeth's prayer is heard.
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