Subconscious manifestations?

They weren't able to control their ability at first, but once they understood the scope of their power, and that it worked from their subconscious thoughts, they were able to use it to erase it. Basically, it's a little like a dream. Dreams are beyond our control because we're simultaneously creating and perceiving, but once we realize we're dreaming, we can break out of that loop and control our dreams. Thus, once they realized that what was occurring were manifestations of their subconscious, they had enough control to use their power to erase it.
This is illustrated a little more clearly in the novel, when Dustin Hoffman's character first obtains the power. Being a trained psychologist, he immediately demonstrates complete conscious control of his ability, and decides to abandon Beth and Harry at first, deeming them weak and slaves to their own hidden fears, but returns when he becomes filled with guilt and rescues them.

I am watching the scene where "Harrys Jerry" being explained and she says "Well we better not piss him off", I was thinking "Well we better give him whatever the hell he wants and try to keep him as happy as possible until we get back!"

I don't understand why this had to be a scary movie. If the 'alien' does not understand human emotion, then why is fear the only concept explored?

That doesn't make sense to me.