I'm pretty sure that's the room that you find the newspaper article that references Walter in it, too. But yeah, it's just some random house / store thing you can go into.
I still haven't finished playing 1, but I know the ins and out of the story and I think it's one of the strongest in the series. I really like 2 for it's originality in character design (and the enemies being representative of certain aspects of James' mental state), Angela is one of my all time favorite video game characters of all time ever ever ever.
Silent Hill 3 is probably my favorite, though. I don't really have a reason for this, actually. I prefer SH2's characters and monsters, and I don't even think SH3's story is particularly mind blowing ... but something about it just keeps me from saying that any other installment of the series is my favorite.
SH4 was my least favorite (albeit I didn't play too too much of SH5). I had no interest in Henry (or Eileen) and I thought the jumping from location to location via the holes really removed from the overall atmosphere. In fact, anything to do with The Room really turned me off ... I hated having to go back there. The ghosts creeped the smurf out of me, though.
As for SH5, it definitely has the best to offer gameplay wise. I never beat it, so I don't know too much about the story. The monsters in SH5 are pretty damned cool, too. Especially the Siam (I probably like Siam just because of how much it reminds me of the Closers, which, incidentally, are the best creatures ever invented).
SH1 has my favorite OST. My Heaven is so smurfING. AWESOME.