and i know thats some seemingly bullshit coming from me but thats a inside-easter-egg-reference only a few know

Preys on primal fears of viralogy, absence of information.
The reader is supposedly infected the instant they view the image. The image itself doesn't need to be scary, just the supposed effects of it.
SmileDog is though, decidedly, pretty ineffective at transmitting this idea, and there are creepy concepts that have improved on the idea.

haha i can imagine improvements but hyper realistic bleeding squidward /sonic / mickey mouse? the context of those things that i would already have prior to becoming a symbol of fear and danger? i guess it would be funny, which I'm sure it was how people took it. smile dog just seems like an earlier generation of those other things mentioned.

i get it, we had Bloody Mary as a kid, but i don't remember having an image associated with it that was widely canonized, leaving each individual to shape their own fearful projection of it. If I stare at smile dog, i just, start to smile. ............now i actually want a movie about smile dog

A lot of that is about icon culture. In younger crowds, horror culture tends to be defined by icons and shareable images, like Jeff the Killer or Slenderman.
They sort of have their own mini-fandoms, and it's pretty clear that it's not necessarily about the spookiness, but about the edginess or the cool factor and a little bit about relating, needing to escape.

I try to keep my ears to the ground for new cool horror stuff, but there have been very few things that hit the spot.
Something like Local58 might be hit or miss. Same with stuff like TheSunVanished.
You can check them out and maybe see what you think.

https://www.youtube.com/watch?v=M75VLQuFPrY
https://twitter.com/thesunvanished

They're modern sorts of horror stories that rely less on icons, and more on themes that tend to be spooky.

Because creepypasta memes.
Sometimes, a shitty creepypasta gets popular not because it's scary, but because people (mostly kids and teens) share it everywhere on the internet for whatever reason. This creates the illusion that the story is scary because is popular. It helps if the story comes with a "scary extra" like a creepy picture or a romhack (just like that Smile Dog picture).
The same happened with Jeff the Killer and Sonic.exe.