My remit in this website is to recommend stories that I highly enjoy. This will sometimes include stories that are famous and considered classics. But mere classic status does not necessarily ensure it is enjoyable (or even comprehensible). The Yellow Wall-Paper, on the other hand, has aged little and remains as vibrant and essential as when it was written.
The titular wallpaper is a strong horror device; it’s full of endless lines and whorls, and it leaves yellow smears on anything that touches it. The longer the protagonist stares at it the more she becomes convinced that it moves, that there is a woman on the other side of the wallpaper trying to get out. I can imagine a separate story about a generic character encountering this wallpaper appearing in the Strand magazine in this era.
But what gives the story real power is the dynamic between the narrator and her husband. The husband has diagnosed the narrator with depression and confines her to the bedroom to recover, and as he is a reputable physician she cannot argue against it. Worse, she is an unreliable narrator who keeps saying that everything her husband is doing is right and for her own good, at complete odds to what we see going on. It’s a strong indictment of the rest cure treatment (which Gilman was subjected to) and of a husband having overwhelming power in general. It also enhances the horror of the wallpaper by offering the interpretation that it is all part of her increasing psychosis; the mundane and supernatural explanations for the story are equally valid, which leaves the reader in a lasting state of mystery of the best kind.
The Yellow Wall-Paper by Charlotte Perkins Gilman
Availability: Free online
Word count: 6,000
First published: The New England Magazine, Jan 1892
Where to find it: Gutenberg and Wikisource, among many others
The Oxford Book of Gothic Tales, edited by Chris Baldick, 2001, Oxford University Press
Ten to Infinity 
Nice detail about the author’s life. Glad you’re not avoiding recommending stuff on the basis of its being a ‘classic’, like this is a bad thing.
By the way, I just filled out the survey, but I thought of more info you need on your site: I, personally, do not know what your definition of a ‘short story’ is. Is there a time period you’re sticking to? I have some v. funny early Celtic myths which are pretty short if you want to read them.
And congratulations on the site!