Once upon a time, there was an Indian-born filmmaker called M Night Shyamalan, who proved it was still possible to wrong-foot savvy audiences with his 1999 supernatural thriller The Sixth Sense. The daring final twist captured the public imagination and propelled the film to six Oscar nominations. His subsequent pictures - Unbreakable, Signs and The Village - have been disappointments in comparison, too caught up with plot mechanics and last gasp surprises (however preposterous) to care about fully rounded characters.

For his latest film, Lady in the Water, Shyamalan creates a modern day fairy-tale full of magic and wonder, which unfolds in the unlikely setting of a run-down apartment complex. He resorts to more linear storytelling - don't look for ingenious twists, there aren't any - exploring the notion of faith in a multi-cultural microcosm of American society, where neighbours view one another with suspicion.

Cleveland Heep (Paul Giamatti), the lonely superintendent of an apartment block called The Cove, has tried to forget about his troubled past by immersing himself in his humdrum work. He trudges from one room to the next, replacing light bulbs and fixing broken appliances, trading pleasantries with the residents including college student Young-Soon Choi (Cincy Cheung), curmudgeonly film and book critic Mr Farber (Bob Balaban), crossword puzzle fan Mr Dury (Jeffrey Wright), and siblings Vick and Anna Ran (M. Night Shyamalan, Sarita Choudhury). The fleeting moments of human contact get Cleveland through the day, until he retires to his room and his painful memories.

For weeks, Cleveland has heard strange noises emanating from the building's communal swimming pool at night, as if some kind of animal is in the water. One night, he learns the fantastical truth: a beautiful nymph-like creature called Story (Bryce Dallas Howard) has crossed from her world, and now resides in the labyrinthine tunnels beneath the pool. Young-Soon Choi tells Cleveland that Story is a Narf, a fabled character from a bedtime story, who must return to The Blue World on the wings of a 40ft bird called The Great Eatlon. However, she is in great danger because deadly predators called Scrunts - wolf-like creatures with grass for fur, which can hide unseen in lawns - will be hunting her down. The only hope is for Cleveland to discover the identities of a Narf's protectors: a Guardian, a Healer, a Guild and a Symbolist. The answers lies within The Cove.

Lady in the Water is a gently involving fantasy, bolstered with impressive special effects, undone by Shyamalan's self-indulgent musings on the state of Hollywood cinema. Ironically, the derision of filmmaking cliches, like romantic comedies in which lovebirds declare their true feelings standing in the rain, turns out to be fair criticism of Shyamalan's film. Giamatti's solid lead performance and flashes of humour lift the picture, while Shyamalan's one-note portrayal of an aspiring writer, whose words will apparently "sow the seeds of change", seems like self-adoration on a grand scale.

Deliciously creepy and wickedly funny, Monster House might just be the best animated family feature of the year. Employing the same motion-capture animation pioneered in The Polar Express, which translates the movements of real-life actors into the digital realm, Gil Kenan's directorial debut is a spooky yarn full of tricks and treats.

A release date in the middle of August seems a tad illogical - the film is set in the run up to Halloween. But there is so much to enjoy, from the dazzling visuals and lively vocal performances to the genuinely scary set pieces, that it has the potential to be the surprise hit of the summer.

Like many of the kids in his neighbourhood, 12-year-old DJ Walters (voiced by Mitchel Musso) has been warned to stay well away from the ramshackle home of crotchety old Mr Nebbercracker (Steve Buscemi). Basketballs, tricycles and even pets, which foolishly stray close to the Nebbercracker front lawn, disappear without trace. DJ is convinced that the dilapidated house is possessed, but his rotund best friend Chowder (Sam Lerner) mocks such a far-fetched idea . . . until the property almost swallows a little girl called Jenny (Spencer Locke) whole.

They turn to slacker pizza chef Skull (Jon Heder) for advice. "I have heard tell of man-made structures becoming possessed by a human soul," he informs them. The three youngsters are terrified: the house isn't in the grip of a malevolent ghostly force after all. Even worse, the property itself is a living, breathing monster, hungry for new occupants. And horror of horrors, with Halloween just around the corner, the demonic Nebbercracker house will have an endless supply of visitors to suck into the darkness. When the local cops (Kevin James, Nick Cannon) and DJ's babysitter Zee (Maggie Gyllenhaal) fail to heed the children's warnings, the plucky 12-year-olds have no choice but to take on the monster house themselves.