When a patient is given a known inactive substance (e.g., sugar pill, distilled water, or saline solution) rather than a substance or device having true medical value, they may improve merely because their expectation to do so is strong. To eliminate the effect of positive thinking on clinical trials, researchers often run double-blind, placebo-controlled studies.
The word placebo literally means "I will please" in Latin. The first known double-blind placebo-controlled trial was done in 1907. The FDA doesn't require that a drug study include a placebo control group, however, placebo-controlled trials have long been the standard.
Placebo Effect, Robert Todd Carroll, The Skeptic's Dictionary, Skepdic.com
The Mysterious Placebo Effect, by Carol Hart, American Chemical Society
Modern Drug Discovery, July/August 1999
The Healing Power of Placebos, by Tamar Nordenberg, FDA Consumer magazine January-February 2000