"An American Werewolf in London" has one of the most realistic appearing werewolf transformation sequences that I have ever seen. The movie was made in a time when CG effects were very expensive, and practical effects were king. While some companies now solely rely on CG as a crutch for their movie monsters, I find that those that still do it old school tend to have monsters that are far more real looking and convincing than their digital counterparts.
It's easy to see that the CG transformation lacks the weight and terror that the practical effects bring to the table. There's several reasons for that, from pacing issues to lack a of convincing sound effects. Most of which were handled quite well by "An American Werewolf in London."
The special effects for An American Werewolf were created by Rick Baker. The sequence shown above was so good, that he received an Oscar for it.
The animatronics used to create the two minute long agonizing werewolf transformation scene were quite elaborate. There were several animatronic heads made for the facial changes of the shot. While the skin and fur are now long gone, it's easy to see how they made the forehead and cheek bones protrude, and more importantly, how they made the lycanthrope jaw extension look so good.
The sections of the cheeks and forehead move by pushing air through syringes.
The animatronics consists of a fiberglass shell, foam and wolf hair. The teeth in the jaw are larger than the actor's teeth, but smaller than the final teeth of the werewolf, which I believe is one of the things that lends to the scene's realism.
But it's not just the visual effects that make this scene scary, it's the sound effects as well. This storyboard from the movie shows us that these sounds were desired from the very beginning of the movie design.
The sounds of bones crunching, hair growing, the feet elongating and the spine popping are so well timed, that it makes the scene all the more believable. Truly, it's a work of art that has yet to be outdone.