In response to your comment, Recovery4Me, it's really impressive that you're willing to try so hard to help this person. It sounds like you have a good start. Not judging the person for doing this is absolutely vital. You have to acknowledge that you don't understand what is driving her to this step, and that you have no right to - for lack of a better phrase - look down on her for it.
Situations like this are really hard because the truth is, there is nothing you can do to make her stop. If she wants to self-harm, she is going to do it no matter what. I know it can be scary, but also try to remember that however bad it looks, she is unlikely to accidentally put her life in danger. Cutters generally have a good idea of where and how to cut, especially if they have been doing it long term. The risk of deliberate suicide is higher, but cutting itself is an effort to deal with emotional pain before it comes to something like suicide. So even though it seems contradictory, her cutting is, in a way, an effort to be less self-destructive, not more.
It can help if you know the specific emotions that are driving her to cut. There can be different reasons - some people self-harm because they feel numb and physical pain is the only thing that can break through it. Some people harm because their emotions are so overwhelming that physical pain is the only thing that break them out of it. It's often an effort to feel in control of a situation where they are otherwise helpless - even if she can't control her depression/anxiety/trauma etc, she can control what she does to her own body. The important thing to remember is that it is a symptom, not a disease - in fact, a coping mechanism for the disease. The trick is to help her learn better and less destructive coping mechanisms without judging her for the one she is using now.
So really, just let her know that you are there when she needs you. Ask her to call or skype with you when she gets the urge to cut. Even if you can't stop her from cutting afterwards, you can help her delay it and get used to the idea that there are other options. Give her other ways to find the same physical release - squeezing ice cubes, going for a run, even just doing jumping jacks for ten minutes to distract herself. Make sure that you can stay calm and reassuring when you are with her - like you said, adding your fear to hers would make things much worse.
My last suggestion is that you also remember to take care of yourself. This is a really hard thing to do, and it's going to be a long and painful process. It isn't your fault if you can't help her, and it isn't your fault if anything happens. If you feel like being this involved with her pain is causing you too much emotional distress, don't feel guilty for stepping back. You can't help anyone if you don't take care of yourself first.
