Pan's Labyrinth is beautiful and horrifying all in the same breath. An engaging movie visually whose story overflows in its demonstration of the power of love, the destruction of war, the moral dilemma of doing wrong to overcome evil, the comforting reassurance of hope, the horror of death, and ultimate sacrifice. It is properly labeled as Horror/Suspense with its decent portion of nerve wracking, tear jerking, and gut wrenching scenes.
I plead that you would not pass on this movie because of its appearance as a children's fantasy story. It is a very powerful movie that was thankfully released December 29th 2006 or else my "Movies of 2007" post would have lost all credibility.
Just a heads up, the movie is subtitled. It is in Spanish (good practice for me!), being that it takes place in the 1944 repression of Franco's Spain.