Both of mine are afraid of monsters. I think it's quite natural.
dd saw a bit of the grinch once and that freaked her out. For a while she refused to go out of the room unless there was someone with her. ds is scared of imaginary monsters even though he's not watched anything particularly resembling monsters. It really is a very natural thing. I would be very surprised pitchounette if your dh had not experienced this as a child. Next time he has his parents round, ask his mum in front of him, I'll bet she has a few tales to tell!
You have to reach a compromise with them. Lights on are fine, for a couple of days, but you do have to set the rules. Agree on a day when you switch off one of the lights, then another and so on.
We always keep the hall light on for the kids. Or you could get a nightlight.