One reason that many cultures, including modern popular culture, uses monsters in their stories is to serve as a type of warning. Stephen T. Asma wrote for "The Chronicle of Higher Education" in 2009. The theme of some of the ancient myths was that monsters were a form of punishment. Hubris, ignoring the warnings of the gods, betrayal or other crimes could be punished in the form of the arrival of a monster. Monsters remind people to stick to their value codes or risk the consequences, which could be dire.
There seems to be a need for monsters to represent the repression of certain sexual urges in society. In no where is this more clear than in vampire literature, right from Bram Stoker up to the present day. The HBO series "True Blood" for example, portrays vampires as a sort of hyper-sexual being, exhibiting the strength, attractiveness and sexual appetite that some people secretly long for in their daily lives, "The Plain Dealer" of Cleveland reported in 2009.
Oddly enough, people seem to enjoy being scared. The crowds at any horror movie's opening weekend can attest to this, but researchers have also analyzed the problem more scientifically. Researchers from the Universities of California and Florida did a study in 2007 that showed that people who watch horror movies actually enjoy the moments of the movie that are normally thought of as the scariest. The fact that fear is enjoyable explains why people always think up the scariest monsters possible to insert into their stories.
Catharsis is release of negative emotions. Literature, drama, music and movies all provide people with catharsis by allowing them to feel and identify with the negative emotions and feelings that have no place in a healthy person's life. By feeling them through fiction, people achieve a kind of psychological release from the negative pressures of the world. Monsters provide catharsis by their existence and by their defeat, Michele Alison Taylor wrote in "the Monster Chronicles."