"Sanity is all that separates us from the monsters, from the creatures that haunt the night. I've seen too many good agents fall to madness. Don't doubt that there are things out there than will shatter your mind. That's why we exist. Because no one else can deal with them." - Agent Alphonse
When a character encounters something beyond the pale, their view of reality slips away from what is "normal" and "rational."
Sanity has two sorts, temporary and permanent. The first comes back with any reaffirmation of your world view. A good rationalization will do it, but so will proof that a supernatural occurrence had a scientific explanation. Driving away the supernatural will also help a small amount. The second is well, permanent. It never comes back, we just get better at hiding it from others and ourselves.
Each player starts with ten sanity (both temporary and permanent). If anything drags them to zero temporary sanity, they loose a permanent point and gain temporary points equal to their new permanent rating. They also gain a dot of a derangement.
Much like willpower the maximum temporary Sanity is equal to the permanent. If ten minus the total of a character's Lores is lower than this, that is the characters maximum Sanity.
Henceforth, Permanent Sanity is P.S. and Temporary Sanity is T.S.
Loosing Sanity
Anything that could cause Sanity Loss is assigned a number. Any character who has a P.S. higher than the number looses the difference in T.S.
Everyone with the same Sanity looses it evenly. For the way different world views affect the loss, see the next section.
Example: Walking down the street is a 10 Loss. No one would loose sanity from it (unless they somehow managed to get an 11 Sanity).
Example: Watching a Vampire use massive amounts of Potence is an 8 Loss. A beginning character would loose two T.S. A Sanity 7 character wouldn't even care.
Example: Seeing the Great Cthulhu is a 0 Loss. Any character would loose their P.S. in T.S. Of course this means they loose a point of P.S. That's the point.
Rationalizing
If the player can come up with a good rationalization, they can make a check. They roll their P.S. against a difficulty you determine. For every success, they regain a point of lost T.S. If they botch, they gain a derangement and maybe a point of appropriate Lore.
Always add their skill appropriate Lore to the difficulty. The more they know, the harder it is to pretend.
There is no rationalizing of 0 Losses. Anything with a 0 Loss tears away subjective reality and leaves the soul out in the cold, cruel world. These things are so completely foreign and wrong that the human mind cannot even stand up to them.
Example: "That's just a guy hyped up on PCP" to a Potenced Vampire. Difficulty three if its a dot of Potence, five for two dots, seven for three, nine past that.
Example: "It's a mutant derived from toxic waste" to a Deep One. Difficulty four plus their Science skill (anyone with real science training would realize it isn't).
Example: "It's just a serial killer" to a string of truly hideously mutilated bodies. Difficulty three, but make them loose a new T.S. for thinking another human would do this.
Derangements
Every time the character looses a point of P.S., they gain a level of an appropriate derangement. Thankfully, these levels can be removed through the glories of modern psychotherapy (or old school psychotherapy, really). This requires a Manipulation + Medicine or Science (if either has the correct specialty). Anyone can try with Manipulation + Empathy, at difficulty +1.
Resisting the insanity is spending a willpower point and making willpower roll against the set difficulty. This staves off the madness for a scene. If this roll is botched, they gain a level of that insanity.
As dots are gained it becomes harder to resist and broader. One might be fear of living snakes; three, fear of anything that looks vaguely like a snake; five of anything scaled or serpentine and anywhere associated with snakes.
If you manage to gain another dot in a derangement that already has five, move it to another derangement and have them linked through role-playing.
* - A minor habit, difficulty six to resist or cure
** - A noticeable trait or phobia, difficulty seven to resist or cure
*** - A serious problem, difficulty eight
**** - On the edge, difficulty nine
***** - Gone, difficulty ten
Humanity and Sanity
Basically, your humanity cannot be any greater than your sanity and your P.S. drops by one when your humanity hits zero, then your humanity rebounds to one. Only those with no Sanity or a foul inner presence (i.e. Vampires, those possessed by Shedim) can drop to zero humanity.
Why? Because regardless of how nice you are, you stop being really human when the caul starts slipping away.