I think Grace Metalious and her book Peyton Place are underrated.  She tackled themes of homosexuality, class discrimination, and child abuse, and because of it most people considered her book smut.  I read it for the first time a couple of years ago and thought it well written.  I don't believe she was taken seriously as a writer by the literary community.

I feel the same way about Bret Easton Ellis in respect to his book American Psycho. When it first came out it was considered nothing but misogynistic smut, and there were death threats, blah blah blah. I know Ellis himself is a rather popular author, so I can't say that he himself is underrated, but I think some of his best work is. AP was more misunderstood than underrated. People thought he was being ultra-violent against women when all he was really doing was making social statements about the Reagan era, and also characterising his own father as the serial killer.

Lunar Park is quite underrated, and I think it actually is something of a new, unique genre which very few authors could pull off. And though it isn't his most important book, it is certainly his best writing, IMO.

http://gauntlet.ucalgary.ca/imgcache/200__~gauntlet_eg_eg2_20050908_LunarPark-web.jpg

There is an author that I have collected a few of his books, that I think is quite underrated:

Jack L. Chalker.

I have his "G.O.D., Inc." trilogy, and if you read it, it actually has a premise which may just be plausible, in the real world!

Let's just say it goes to prove that there IS something behind those Late-Nite Infomercials!!!

Dorothy Allison is one of my favorite authors, but very few have heard of her. "Bastard Out Of Carolina" is one of my favorite books of all time. Angelica Huston adapted the book to a movie and stayed pretty on track with it.

http://endeavor.med.nyu.edu/lit-med/lit-med-db/webdocs/webdescrips/allison734-des-.html

http://www.imdb.com/title/tt0115633/

H.P. Lovecraft.

He's called a "horror story" writer.  What Lovecraft wrote was true horror, not Stephen King stuff.  If you can read a Lovecraft story and not have to sleep with the lights on that night, then you didn't get it!
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The Freudian explanation for the manifest content of your nightmares held that your mind could not bear what it was trying to grapple with if it did not symbolize the disturbance with monsters, ghouls, werewolves, and the like.

Lovecraft understood this independently of Freud. 

The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents.
H. P. Lovecraft, "The Call of Cthulhu"

Lovecraft doesn't get to you by making you the witness of hideous things, he gets to you by connecting circuits in your mind that were not meant to be connected, and for good reasons!

H.P. Lovecraft.
http://www.inthe00s.com/smile/03/darkangel.gif
The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents.
H. P. Lovecraft, "The Call of Cthulhu"

You are SOOOOOOO right on the money!

Lovecraft, and other like-minded authors, such as Clark Ashton Smith, August Derleth, J. Ramsey Campbell, Frank Belknap Long, and others, created parts of the world that are so realistic and chillingly prophetic, that you wonder why you can't find them.

In fact, Rand-McNally Maps once made an actual map indicating where Arkham, Dunwich, Innsmouth, and the other locales of the Lovecraftian mythoi were. Some people still ask if the places are or were real.

They tapped into the subconscious, and used the possibility factor on it until it became twisted enough to provide tantalising visions of what came out in their books.
Today, Lovecraft is considered one of the "architects" of modern Gothic/Horror Literature.

"Ia! Ia! Cthulhu phlui fthagn!"

You are SOOOOOOO right on the money!

Lovecraft, and other like-minded authors, such as Clark Ashton Smith, August Derleth, J. Ramsey Campbell, Frank Belknap Long, and others, created parts of the world that are so realistic and chillingly prophetic, that you wonder why you can't find them.

In fact, Rand-McNally Maps once made an actual map indicating where Arkham, Dunwich, Innsmouth, and the other locales of the Lovecraftian mythoi were. Some people still ask if the places are or were real.

They tapped into the subconscious, and used the possibility factor on it until it became twisted enough to provide tantalising visions of what came out in their books.
Today, Lovecraft is considered one of the "architects" of modern Gothic/Horror Literature.

"Ia! Ia! Cthulhu phlui fthagn!"

I was just talking about Lovecraft on the Haunted Places board.  See, many of his stories are set in Western Massachusetts/Southern Vermont.  The region where I live!  Whately is the next town over.  Wilbraham is down the highway near Springfield.
http://en.wikipedia.org/wiki/The_Dunwich_Horror

Something I found true before reading a word of Lovecraft, spending a life walking across the wooded lots of long-abandoned farmland, and driving the dark network of backroads of interior New England:

...But the true epicure in the terrible, to whom a new thrill of unutterable ghastliness is the chief end and justification of existence, esteems most of all the ancient, lonely farmhouses of backwoods New England; for there the dark elements of strength, solitude, grotesqueness and ignorance combine to form the perfection of the hideous.

H.P. Lovecraft
"The Picture in the House"

I also mentioned on that board that I spent my childhood in a NH farmhouse built in the Revolution.  There are ghost hunters.  I'm not one of them.  I don't see a need to search for the spirits departed individuals.  The "haunting" I detected, the same one Lovecraft describes, is not something you have to seek.  It's just there.  It comes to you.  You don't come to it.  Is it "supernatural"?  I don't know.  It is palpable whatever it is, and something beyond psychogenic.

Poe understood horror in the same way.  In the more debilitating stages of my clinical depression, I experienced episodes resembling "The Fall of the House of Usher."  I also had a complete anthology of Poe's poems.  For most those poems are chilling.  For me they were diagnostic. 
"Dream-land" in particular:
http://www.pambytes.com/poe/poems/dreamland.html
A lot of the Goth kids, the ones who deck themselves out in vampire costumes, whould read that and say, "Cool!"  That wasn't me.  I had been to that "ultimate dim thule."  It was not something I was trying to embrace, it was something I was trying to escape! 

So read your Anne Rice and your Steven King by all means.  Intrigue yourself with the symbols of horror.  The vampires, the ghosts, the demons, the witches, and the werewolves are there for your amusement.  The same is true with the works of Poe and Lovecraft.  Just don't go too deep.  I do not recommend immersion in the primal stuff of horror because it is eternal.  There is no silver bullet, there is no exorcist, there is no countervailing "white magic."  There is no entity you can expel any more than you can erase the stars from the sky.  It's just there, but you need not know it.
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^  speechless with agreement.