I got a definite Philip K. Dick meets H.P. Lovecraft vibe from this story. I also disagree with Alistair's analysis, that Luke was a villian. Luke has lost control of his mind, and therefore, his actions. I'm not sure to what extent that he knew he was losing his mind--I think that he honestly believed that talking his kids to the fence was the right thing to do.
The Forgetting Thing, more than the other things, represents the real horror of this story for me. It's not just the slow destruction of the Earth, it's not the Thing that Watches, it's not even the dissaperance of the animals. It's that the world is slowly being wrenched from humanity's grasp, and no one can remember this long enough to do anything about it.