Tara, though a pretty and talented teenage girl, is not liked at her school and has no friends. Upon returning home one day on her bicycle, she is struck down by a van and promptly kidnapped. She seemingly awakens in a hospital bed with a nurse informing her that she is far from home and was found in Vermont. After some odd personal questions, Tara finds out to her shock that she is not in fact where she thinks and attempts to scream for help and run which grants her nothing. The kidnapper apprehends her as she tries to escape and, with the help of the "nurse", throws her into the basement.
Tara explores the basement, finding only a young boy hanging on a rope, close to death. She saves him and the two begin to form a bond. The boy, named Johnny is sweet and kind but cannot talk. He has to suffice communicating by writing in the dust. With Johnny's assistance, Tara uncovers cryptic warnings on the walls such as "Beware the Fair-Haired Child!" and "Get out before it wakes up!".
As if that wasn't enough, the two discover a room with numerous backpacks and a bathtub stained with blood showing that they are not the first victims in this basement. Shortly after this, Johnny begins to breathe hard as a great gust of wind shakes everything in the basement.
Tara attempts to comfort him by talking to him about the picture drawn in her book - a comic she made up of a princess befriending some seemingly evil creatures who help her out and become the greatest friends she's ever had (references the plot).
Angered with the couple, she yells at them for the mistreatment of her and Johnny. It is then we witness his transformation from a normal boy into the hideous demon dubbed the "Fair-Haired Child". Scared out of her wits, Tara hides from the creature successfully until it reverses back into the boy she befriended. It is then he reveals his shameful secret: the couple are his parents. Twelve years ago, Johnny died tragically by drowning on his fifteenth birthday while trying a small rowingboat that his parents had given him as a birthday present.
Desperate over the loss of their son, Johnny's parent's gain hope from a ritual book they receive from an old student who seemingly practiced occultism. By performing a ritual following the book's instructions, the parents make a deal with (we assume) the devil, which involves them providing a sacrifice of one child per year until the quota of twelve is reached. Tara is the last before Johnny can become human again.
Johnny begins to cry and pound the wall, writing that he doesn't want to hurt her. She embraces him as he begins to change and tells him she forgives him. In a horrifying and graphic scene, the demon re-emerges again and performs his final kill by disemboweling Tara.
Soon afterwards, Johnny's parents descend into the basement to view Tara's corpse covered with a piece of old newspaper with the words "I forgive you, Johnny" written in her blood (which she apparently wrote before expiring).
The couple then happily performs the final stage of the ritual, leading Johnny through an arch in their garden, transforming him into the beautiful, blonde boy he was before his death.
The next scene shows his parents calmly playing their instruments as Johnny sits quietly, looking over Tara's drawing. Upon their questioning of his silence, Johnny (speaking for the first time) responds about his jealousy of their talent and his wish for something that he himself is good at. Smiling, he informs his mother that he found it. His talent is bargaining.
It is then that the lights begin to flicker and a strong wind travels through the house as his mother hysterically screams, asking Johnny what he did. He replied that it took them twelve kids to resurrect somebody... he narrowed it down to two... and they didn't have to be kids.
Johnny smiles sadistically as Tara bursts through the window as a female version of the demon and gruesomely kills his parents.
Flash forward to the alive-and-well Tara waking up, curiously observing the bandaid on her arm (indicating Johnny injected her with something to make her temporarily forget). She meets him in another room and the two introduce themselves again as he takes her for a stroll to the lake. As they pass, the camera pans to the graves of Johnny's parents in the garden.