It's the 1925 film! The copyrights are gone a long time ago. (here is a higher-resolution video, and you can even download it by right-clicking on it and selecting "save video as")
I found this movie fascinating. It's pretty entertaining, actually. I think I can recommend watching from 50:13, where Christine removes the phantom's mask. Some people who watched this when this was made is said to have fainted!!
I watched the whole thing, actually. I downloaded it to my iPod and watched it a little by little every night.
The phantom's makeup was done by the actor (Lon Chaney) himself and it's said to have been very painful. He lifted the tip of his nose up and painted his eye sockets black so his face looks like a skull. But at the end of the end where he's running away, his nose seems to be normal. It must have hurt so much, I guess he took it off.
The movie's very... entertaining, so I recommend you watch it.
Oh and the part of the masquerade is in COLOR! It's amazing to watch this and think it's from like a hundred years ago.