Story of Kuchisaki-onna
A long time ago in Japan, there lived a beautiful and vain woman who was married to a jealous and violent man, a samurai in most stories. The woman was unfaithful to her husband and, after discovering her infidelity, the man took a sword and slashed her mouth from ear to ear, asking "Who will think you are beautiful now?"
Now her vengeful spirit wanders the streets of Japan, hiding her mutilated face and seeking to take her misfortune out on anyone unlucky enough to come across her. So the legend of Kuchisake Onna, the slit-mouth woman, was born.
In the 1970s, stories began appearing in Japan about a woman with a surgical mask covering the lower half of her face (not uncommon in Japan) who appeared to people at night. She would ask the traveler if they thought she was beautiful ("Watashi kirei?"). If they answered in the negative, she would immediately kill them with a long pair of scissors.
Due to her unearthly beauty, the victim would usually say yes. The woman would then rip off her mask, revealing the horrible, gaping wounds marring her face. "How about now," she would ask the horrified traveler.
Saying no resulted in death by scissors, as you would expect. However, the terrified victim would hardly want to offend this nightmarish creature, and most would assure her of her beauty. But it would not save them. The Kuchisake Onna would slit their mouth from ear to ear, making them look just like her.
The only way to be saved was to answer the second question with "so-so" or "average". This would confuse the Kuchisake Onna, giving the victim time to escape while she was lost in thought. Trying to run without this distraction was pointless - the spirit would simply reappear in front of them.
Rumors and sightings of the Kuchisake Onna chasing children first began to spread in 1979, which caused real scares in many towns. Police patrols were increased in some places, and some schools began sending children home in groups escorted by teachers.
The legend seems to have a basis in reality. In 2007, a coroner found records about a woman with a torn mouth chasing children. She was hit by a car and killed during one such chase. This woman was likely the origin of the 1979 panic.
The legend of Kuchisake Onna has survived to the the 21st century, with many variations popping up in Japan and other countries. For example, in South Korea she appears with a blood red face mask.
The Kuchisake Onna appears in film in Carved aka A Slit-Mouthed Woman aka Kuchisake-onna (2007) and its prequel Carved 2 aka Kuchisake-Onna 2: The Scissors Massacre aka A Slit-Mouthed Woman 2 aka Kuchisake-onna 2 (2008).
Taken from here