Shattered Memories is a reimagination of the first game and retains the premise—Harry Mason's quest to find his missing daughter in the fictitious American town of Silent Hill—but is set in a different fictional universe, has a different plot, and altered characters, alongside new ones. Five endings are available. Gameplay takes place in two parts: a framing, first-person psychotherapy session, and an over-the-shoulder perspective of Harry's journey through Silent Hill, which is periodically interrupted by the occurrence of a shift to an alternate dimension. Answers given to the psychological tests in the therapy session affect various gameplay elements in Harry's journey.
After designing the Silent Hill prequel (2007), which intentionally replicated elements of the first installment, Climax Studios wanted to try a different approach to creating a title in the series. Among the changes made was the removal of combat and the constant presence of monsters. Akira Yamaoka composed the soundtrack of the game, which was the first in the series to prominently feature dynamic music. The game received generally positive reviews, and its graphics, voice acting, soundtrack, and use of the Wii Remote were praised by reviewers. Some reviewers criticized Shattered Memories' chase sequences and duration, which they deemed potentially frustrating and short.
The game begins with a psychotherapy session conducted by Dr. Kaufmann, which acts as a frame story for Harry's quest. Suffering from issues with his memory, Harry travels home to search for his seven-year-old daughter Cheryl, hoping that she is already there. His consciousness moves between the in-game real world and Nightmare—a frozen version of the town in which monsters chase him—and finds that another family lives in his house. Police officer Cybil Bennett arrives and decides to take him to the police station, but they become caught in a blizzard, and Harry eventually leaves her car to continue his search. Eventually, Harry finds his way to the local high school, where he learns from a woman named Michelle Valdez that a Cheryl Mason attended school there previously, but then moved. She offers to drive Harry to Cheryl's new address, but after briefly stepping away, he returns to find Michelle has been replaced by Dahlia Mason, who claims to be Harry's lover and acts as if she has been with him the whole time. He accepts the ride, although during another shift to the Nightmare, the car falls into a river. Harry escapes but loses consciousness.
He awakens in a wheelchair pushed by Cybil in the town's hospital. Before Cybil can tell him about his file at the station, the town transitions to the Nightmare. Harry escapes and meets Lisa Garland, a nurse injured in a crash, and escorts her to her home. At her request, Harry gives Lisa pills for her headache, and returns to find her either dead or dying, depending on in-game actions taken by the player. Finding him next to Lisa's corpse, Cybil attempts to arrest him, but is frozen as the Nightmare emerges around them. Harry escapes to Cheryl's home, where he finds an older Dahlia who claims to be his wife and tells him that Cheryl is at the lighthouse. Harry enters the Nightmare, escapes it, and eventually gets a ride from Michelle. Harry finds a young-again Dahlia aboard a boat at a lakeside harbour, who sets the course for the lighthouse and seduces him. Harry wakes, finds an aged Dahlia and the environment covered in ice, and crosses the now-frozen lake but falls into the water and passes out. Harry is dragged ashore near the lighthouse by Cybil, who confronts him with the news that Harry Mason died eighteen years ago in a car accident. As Harry proceeds, he finds "the lighthouse" is the name of Dr. Kaufmann's counseling clinic: the patient in the therapy session is an adult Cheryl, who is in denial over her father's death. Harry enters the office and Cheryl either reconciles herself to his death or continues to cling to her fantasy father.
At the end of the game, an old video clip from Cheryl's camcorder is played. Four variations of this clip are available depending upon the player's actions as Harry. In "Love Lost", Harry packs his luggage in a car and tells Cheryl not to blame herself for her parents' separation. In "Drunk Dad", a drunken Harry yells at Cheryl, demands a beer and blames his drinking on his family. In "Sleaze and Sirens", Harry flirts on his bed with Lisa and Michelle. In "Wicked and Weak", Dahlia verbally abuses Harry and slaps him. In the "UFO" joke ending, Cheryl tells Dr. Kaufmann that she believes Harry was kidnapped by aliens and that Silent Hill is a spaceship. After James Sunderland interrupts, the therapy session continues, revealing Cheryl to be a dog and Dr. Kaufmann to be an alien. Regardless of the ending, the final scene shows Cheryl packing away mementos that the player can collect throughout the game. An additional scene the player can obtain shows her reconciling with Dahlia outside the clinic.