Although placebo pills are supposed to have no pharmacological activity, people taking placebo pills describe a variety of positive (i.e., placebo phenomenon) and negative (i.e., nocebo phenomenon) reactions. This has major clinical implications. Placebo reactions account for a substantial part of improvement when treating patients with hypertension, mental disorders, and even after surgical procedures. The nocebo phenomenon on the other hand is responsible for non-compliance and discontinuation of many pharmaceutical interventions. Mechanisms that underlie the placebo and nocebo effects may be related to expectation and/or classical conditioning, but some methodological issues should also be considered. Most experimental studies investigating the placebo effect have used paradigms to induce ‘placebo analgesia’, the reduction of pain perception after receiving an inert substance and an instruction that this medication would relieve pain. This paradigm allows investigators to examine the neurobiological circuitry of the placebo response using neuroimaging techniques.