For me what comes to mind is that scene from resident evil 4 and 5 where insert character’s head here gets cutoff with a chainsaw and you actually see the head land right on the ground.

It’s disturbing for certain although I know that there is a lot worst stuff nowadays however I’ll leave that up to everyone else to discuss.

So tell about something from any game that is the most disturbing thing you have witnessed while playing or watching a video game. 

end of Dead Space: Extraction

Wow! I don't think that scene can be topped! you win CGI-Quality

dragon age:origins

the broodmother wasn't scary, but it was disgusting, how many saggy tits did it have 20? good job bio ware they created one of the most disturbing creatures i have seen in video games, and it was a hell lot of fun killing it 3 times

http://www.youtube.com/watch?v=S1mJ9atk3dE

ROFL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Another frightening/disturbing scene is where you're forced to play as Ridden naked in MGS 2 http://www.youtube.com/watch?v=WS8-B6H_I20

eww

Dead space also had many disturbing decapitations http://www.youtube.com/watch?v=GOb1USs9UOs&feature=related

Screen tearing.

It's so horrible! ;_;

For me it was Silent Hill 4, there were some pretty revolting monsters in that, not to mention getting killed by them wasnt pretty.

and in completely the other direction, i would say Bayonetta, i loved it, but some of the cutscenes in that were cringe worthy.

This... Thing, is actually supposed to be a dude...