Blue Velvet, and David Lynch’s films in general, provided a lot of inspiration to the developers of the SH games. This is quite apparent with SH2 and Blue Velvet, but there are a lot of other examples, as well.

Silent Hill 2: Maria is a woman who dyes/bleaches her hair (unnatural hair because color is changed), whose personality changes unpredictably, and who grows attached to James over the course of the game. She works as a performer in a bar.
Blue Velvet: Dorothy is a woman who wears a wig (unnatural hair because it’s a wig), whose personality changes unpredictably, and who grows attached to Jeffrey over the course of the game. She works as a performer in a bar.

Silent Hill 2: Heaven’s Night,. same stage as bar in Blue Velvet
Blue Velvet: Image: the bar where Dorothy sings.

Silent Hill 2: Angela, a victim of sexual abuse whose family is missing, wields a large kitchen knife
Blue Velvet: Dorothy, a woman whose husband and child are missing and who is suffering sexual abuse from Frank, wields a large kitchen knife

Silent Hill 2: Blue Creek Apartments, where James first meets Pyramid Head.
Blue Velvet: Deep River Apartments, where Dorothy Vallens lives.

Silent Hill 2: Pyramid Head moves kind of drunkenly (Ito says movements inspired by drunk people in Making of SH2), abuses monsters and attacks James, and James shoots at him from a closet where he’s hiding. Represents a different side of James, and makes him realize his guilt.
Blue Velvet: Frank huffs drugs and sexually abuses Dorothy, beats up Jeffrey (also tells him “you’re like me”), and Jeffrey shoots at him from a closet where he’s hiding.

Hiding in the closet.

Shooting from the closet.

Additional crap:
-There is a great contrast between the 2 women in James’ life: Mary and Maria. Likewise, Dorothy (Isabella Rosellini) and Laura Dern’s characters are quite different.
-In the beginning of the movie, Jeffrey finds and ear (used to hear, important in communication). It leads him to go looking for Dorothy. In the beginning of SH2, James finds a radio (important in communication). It is used on his quest to find Mary.