Does Sanity Matter in the Forest?

What does sanity do? It has been confirmed that Sanity has no effect on the player whatsoever. The developers had plans to incorporate effects, however at this stage it has no effect. The only thing it does is allow the player to build effigies.

What happens if your sanity is low in the forest?

On the wiki, it says having a low enough sanity rating can cause the game to trigger auditory "hallucinations."

What keeps cannibals away in the forest?

Large Effigy

Large effigies are the most expensive effigies a player can build. It lasts for five times longer than any other effigy in the game, being both a great long lasting light source and CAN deter cannibals. It can be re-lit after it has expired.