Sanity

Insanity is a planned feature, one of the major ones, listed on the Official Don't Starve Roadmap, found at Klei Entertainment's official website. As described by Kevin, a "Super Moderator":

" The Sanity meter:  Seeing scary things and performing certain actions will slowly drive you insane. While insane you can regain sanity via dapperness, and other acts of civility. This will give you one more ball to juggle, and let us introduce all sorts new interesting uses for existing items and systems."

Although there isn't any real knowledge to how it works, aside from the fact that it's a meter, such as Health and Hunger, this info gives us a basic idea of how it may work.