This review refers to the Oxford World's Classics edition, edited by WS Lewis, with a 26-page introduction and eight pages of endnotes by EJ Clery. There is a select bibliography and a chronology of the author, Horace Walpole. Importantly, the book includes both the first and second editions' title-pages and prefaces.
The first edition, "The Castle of Otranto: A Story, translated by William Marshal", was published in December 1764 (but marked 1765 on the title-page). It's preface tried - and succeeded for awhile - to give the impression that the tale had been "found in the library of an ancient catholic family in the north of England" and had been "printed at Naples ... in the year 1529. ... The style is the purest Italian."
The style was instead the purest Walpole and he quickly confessed; so that in the rapidly-issued second edition of 1765 (the book was an immediate hit), the revised preface became, as EJ Clery makes clear, "a manifesto for a new type of writing", and the title-page was amended to "The Castle of Otranto: A Gothic Story".
The inclusion of the adjective into the story's title is fundamental to the book's reputation as being the well-spring of much (all?) that followed in subsequent western literature that effected to underscore its credentials with a Gothic - or Gothick - motif. One could argue that that includes 90% of western literature (as much Thomas Pynchon as Stephen King), but this is going too far; for as Walpole himself makes plain in his second preface, his work was an attempt to marry imagination with nature, fantasy with reality, and that he had progenitors in the essay: "That great master of nature, Shakespeare, was the model I copied."
The story itself - a tale of lordly tyranny, supernatural horror, and family feuding that would have interested Shakespeare himself in its dramatic possibilities - is told over five chapters, barely one hundred pages in total, and so can be read in a few hours. As the excellent introduction relates, Walpole himself thought the story a piece of whimsy, and did not attempt to savagely repudiate the criticisms raised about both the style of writing and about the narrative itself. He was aware of the novella's power, however, in creating a new species of romance.
The work today is as much read for its historic relevance than for its terror and sublime effects, but both of these aspects recommend it.