To create a truly inhuman being, one has to use concepts that no human being would truly understand. Once you start understanding this being then it's no longer truly alien. It becomes an exaggerated portrayal of humanity, or a human being dressed up in a funy costume. Basically, you can't portray a truly alien character and yet allow your readers/viewers/players to identify with it. By definition, it's impossible.
The alien in Enemy Mine looked funny, had a strange culture and method of reproduction, but it was still capable of basic human emotions. It found a lot of the same things funny, it got offended, it worshipped higher beings, and it was capable of love. Part of the whole plot in the movie is that slowly the two beings who thought they were impossibly different started to find things they had in common and started to realize they weren't really that different after all. I think part of the whole idea of the movie is that "aliens are really just people who gargle when they talk and asexually reproduce." I mean, you could substitute a Nazi for the alien and an American WWII fighter pilot for the human and have the pretty much the same exact movie.
Imagine a movie where the only characters were Cthulu and a living glob of axle grease. Neither of these characters act as you'd expect a human to act in similar circumstances. It's utterly impossible to understand their motives because they are so truly alien. Would that be a good movie? No, because there's no creature that you can identify with. It would be like watching abstract art, where during the whole two hours you see colors swirling around the screen in random patterns. It might be fascinating, but you probably wouldn't want to see it more than once and sitting through it for more than a half-hour would probably drive you a little closer to Insanityville. Now, if we take the living glob of axle grease and give him a human voice over and play him like a very angry person who has a fetish for toenails then it becomes a little easier to watch. Perhaps not much, but still easier.
Humans, or at least a human-like figure, are essential for a good setting. They don't have to truly be humans, but they have to be there. The Lord of the Rings is a good example. We're actually supposed to identify with the hobbits. Though there are humans in the setting, they play the role of "strong, war-like beings who know what they're doing", while the hobbits are the powerless beings that end up finding that there's no limit to their own potential.
You have to have something in the story to identify with otherwise you'll get bored and/or confused.