The first impression the reader gets is that Kurtz is alarmed, even repulsed, by the “primitive” behavior of the natives, their rituals (there are hints of cannibalism), their society—a primordial tribe without knowledge or benefit of “civilization.” But Conrad is going much deeper—he is letting the reader find out that Kurtz’ real discovery is the primitiveness of so-called civilized colonizing western cultures, the barbarism of humanity itself, the “horror” of being a human; therein lies the greatest literary irony: when Kurtz’ very proper and “civilized” fiancée asks about him, Marlow says “His last words were of you.” The power of this novel-long, beautifully conceived allegory, a condemnation of Western Hegemony, is in his cry, “The horror! The horror!” We think of ourselves as being so dignified, so enlightened, compared to "backward" societies, and yet we have capital punishment, World Wars that must be numbered, indifference to world poverty, weapons capable of annihilating whole cities--Conrad's admonishment from another world echoes today like Kurtz' cry.
I'd love to give you a definitive answer, but that's just not possible. Those last words spoken by Kurtz have been the subject of endless debates and discussions about this story. In general, most of the opinions fall into two camps.
The first is that at the moment before his death, Kurtz is hit with the full realization of all of the atrocities that he has committed while in the jungle. Putting people's heads on stakes is indeed fairly horrific. His words could be his spoken acknowledgement that he now realizes how much horror he has wreaked upon the people of the jungle.
The second explanation that I hear the most is that Kurtz's words aren't technically his words. The words might be spoken by Kurtz, but it is Conrad's voice that we are really hearing. The story takes place in the later half of the nineteenth century. This places the story in the middle of the Age of Imperialism. Part of Europe's attitude during this time period was that their western civilization, culture, etc. was superior to everywhere else. There was this idea that western civilization was the pinnacle, and that it would eventually replace all of the "darkness" that existed in the "uncivilized" parts of the world. Kurtz was an agent of that colonization and committed horrific atrocities in the name of progress. Conrad is pointing out to readers that this notion of committing atrocities against other cultures is horrific. "The horror" is the entire concept of forcing your "superior" culture on a different culture.