The placebo effect is usually used in a critical manner when talking about things like homeopathy. We usually use it to imply that people are being tricked or stupid. The thing is, that the placebo effect isn't just in the mind - it genuinely appears to heal the body.
It even works when the patient knows it's a placebo.
In one study, patients with IBS were knowingly prescribed a placebo, and 59% saw an improvement in their symptoms. Placebos also work as a powerful painkiller and, what's more, they seem to be getting more effective.
As many as 90% of recent trials from new pain medication in the States have been canned, due to the lack of evidence that they work better than a placebo. In the last couple of decades, pain meds have gone from being rated as 27% better than a placebo, down to just 9%.
It's thought that the expectation of the power of placebo is feeding into its efficacy, creating a self-fulfilling prophecy. The only problem is that we have absolutely no idea how.