Placebo is one of the most powerful effects in all of medicine, and accounts for somewhere between 35% and 55% of the effects of all therapeutic interventions, whether medical, psychological, or surgical. A famous study at Johns Hopkins showed that men with angina pectoris (chest pain from heart disease) undergoing a sham heart operation not only had 80% less pain, they also demonstrated 70% improvement in the strength of their heart function -- exactly the same effects they got from the "real" heart operation! Dozens of studies have shown that over half the effectiveness of any pain reliever, including morphine, is due to placebo effect. Placebos can even reverse the normal pharmacologic effects of medications, and work even when the patient knows they are receiving placebo.
Even more importantly, studies have shown that when doctors administer placebos, but think they have administered an effective medicine, the patient frequently responds as if they have received the effective medicine. The reverse is also true, with doctors giving medicine they believe to be placebo, and the patients having reduced effects in response.