Lunacy is an interactive movie adventure consisting of a long series of interconnecting full motion video (FMV) sequences, much like The 7th Guest and System Sacom's earlier Saturn game, Mansion of Hidden Souls.

Anthony offers him the key to his cell, but after an attempted escape, Fred quickly finds himself back in the hands of Lord Gordon, the ruthless town ruler.

Throughout the village he meets the various people that populate the Misty Town, such as the irritable Dr. Morse, the soft-spoken Rose, and the melancholic Gray.

A dried up well may or may not hold the key to his mystery and as his quest unfolds, Fred's path will lead him across various items that may serve one magical function or another.

Although the game maintains the illusion of free three-dimensional movement, in reality each action loads a pre-scripted FMV sequence.

System Sacom previously developed the Sega-CD and later Saturn game, Mansion of Hidden Souls which was also a first person adventure title.

[5] Though Lunacy met with a range of critical opinions, reviews almost universally agreed that the game combines compelling story elements and graphics with the limited gameplay typical of the interactive movie genre.

"[6] Stephen Fulljames gave it a negative review in Sega Saturn Magazine, asserting that "'interactive movies' will never be as exciting or playable as something generated in real time.

"[10] A reviewer for Next Generation concluded, "Although not a very deep title, Lunacy is just stylish enough to be as entertaining as a good late night movie or suspense novel.