Sinister ending explained

What happens

Ellison's family moves away, but he finds one more reel and sees the pattern: in every case the missing child is the killer. Ashley drugs her family, kills them on camera, then joins the other children in the box of films.

The last image

Ashley's murders become the newest reel in the collection, and she takes her place among the children in the footage.

What it says

Ellison treated other people's deaths as material, and the images he kept watching used his own family as the next subject. Burning the films and leaving the house changes nothing, because evil here travels through recordings, and being seen is how it spreads.