Placebo effects are beneficial health outcomes not related to the relatively direct biological effects of an intervention and can be elicited by an agent that, by itself, is inert. Understanding these placebo effects will help to improve clinical trial design, especially for interventions such as surgery, CNS-active drugs and behavioural interventions which are often non-blinded. A literature review was performed to retrieve articles discussing placebo implications of clinical trials, the neurobiology of placebo effects and the implications of placebo effect for several disorders of neurological relevance. Recent research in placebo analgesia and other conditions has demonstrated that several neurotransmitter systems, such as opiate and dopamine, are involved with the placebo effect. Brain regions including anterior cingulate cortex, dorsolateral prefrontal cortex and basal ganglia have been activated following administration of placebo. A patient's expectancy of improvement may influence outcomes as much as some active interventions and this effect may be greater for novel interventions and for procedures. Maximizing this expectancy effect is important for clinicians to optimize the health of their patient. There have been many relatively acute placebo studies that are now being extended into clinically relevant models of placebo effect.