An American Werewolf in London (1981)

Together with The Thing, this is still to this day, one of the best creature films in history.

Why?

It's got a good script, decent music, ok actors and above average cinematography. Nothing mind-blowing.

But the special effects on the other hand, they are far from average.

They're so good, the film revolutionized the world of special effects. After this film, everything was possible. Film makers no longer had to use cheesy methods like showing just the shadow of a man morphing into a beast, or fade images of different stages of a decomposing corpse into one another to create a bad illusion of time going faster. This film proved that you could show what you wanted to show. And you could make it look real. Better yet: You could make the unreal believable.

It spawned a long line of imitators, like the rather mediocre Howling series, set the stage for the aforementioned The Thing, and even conjured a best-overlooked sequel, that ironically pays no heed to the great old-school effects, but relies only on horrible CGI instead.

But this is where it started. This is when movie monsters started to look good, really good, for the first time, and still do so today.

IMDB
NOTE: Make sure to get the full, uncut version, which shows off more of the monster and more gore, which is the whole point of a film that has such groundbreaking monster and gore effects.