According to Creator Mick Garris, the directors involved were given free reign as to what stories they told, however they wanted to tell them. But when Showtime came on-board, they laid out a handful of rules. One was, there could be no full frontal male nudity. Another was, there could be no violence committed on a child by another child (but violence by adults on children or children on adults was fine).
Due to the poor reception of season two, the show was renamed "Fear Itself", and the third season became a whole different show.
This show was fully financed even before Showtime came along. Originally, the episodes were just going to be released on DVD by Anchor Bay Entertainment.