How to hide in Amnesia: Dark Descent?

I always thought that to avoid monsters, you had to be in a closet or some box-castle that you had time to build around yourself while a particularly slow one was looking for you (If you've actually done that, high five). But I read that some people just turn off their lantern and crouch if they're in a dark hallway. Does that really work? It seems like you would be seen. Also, does looking at the monsters only deplete your sanity or does it also make them see you somehow?