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Despite the recent blossoming of rigorous research into placebo mechanisms and the long-standing use of placebos in clinical trials, there remains widespread and profound misunderstanding of the placebo response among both practicing physicians and clinical researchers. This review identifies and clarifies areas of current confusion about the placebo response (including whether it exists at all), describes its phenomenology, and outlines recent advances in our knowledge of its underlying psychological and neural mechanisms. The focus of the review is the placebo analgesic response rather than placebo responses in general, because much of the best established clinical and experimental work to date has been done on this type of placebo response. In addition, this subfield of placebo research offers a specific neural circuit hypothesis capable of being integrated with equally rigorous experimental work on the psychological (including social psychological) and clinical levels. In this sense, placebo analgesia research bears all the marks of a genuine multilevel interdisciplinary research paradigm in the making, one that could serve as a model for research into other kinds of placebo responses, as well as into other kinds of mind-body responses.