It's really easy to get lost in the wording of the rules on this card. But when you understand what it's all about, you will see just how effective this enchantment can be in Rakdos and Mardu Burn decks.
Theater of Horrors basically lets you draw an additional card each turn, but you can play those cards only if you've dealt damage to your opponent this turn. That means you could stack cards from your library and wait for the best moment to play them.
You can also choose from among the exiled cards which ones you want to play, and that gives a huge advantage in the latter stages of the game.