Yes, for the communal aspects of seeing a scary movie in a crowded theatre who might all jump in unison (as was the case when I saw it last night) even though many of them were being obnoxious and chatty (as was also the case when I saw it last night).
No, the biggest reason lies in that pic up there. I tried to find as large an image as I could -- you'll still probably have to click on it to see it at full size -- to best illustrate my point. That shot -- a night-vision tableau of a bed, two sleeping bodies, and an open door, leading into a dark, cavernous hallway -- gets repeated at least a dozen times in Paranormal Activity. The movie keeps returning to it, rhythmically ebbing and flowing from day to night, relief to crisis, but always back to that fixed shot of the bedroom. And you know that where the action's gonna be. You're waiting for it. If the movie's doing it for you, you're tensed up in anticipation for what's going to happen in that room. Or under that bed. Or behind that door. Or in that hallway.
And on a small screen, you could probably keep an eye on it all at once. But on a big screen? There's just no way. Try as you might, there's just too much area to cover. Your eyes will dart from the hallway, to the bed, to the bodies, to the ceiling, to the floor. There's something waiting in the blackness outside that door, but you can't afford to keep your eyes on it for too long because why is that sheet moving??? You want a scary movie to keep you in that kind of anxious state.
Part of the reason Paranormal Activity is so successful -- and I certainly think it is -- is because it makes us stare at that bedroom for so long, again and again. Stare at it on a big screen, is what I'm saying.