I just saw a wonderful explination of this on the Discovery Channel show Human Body Pushing the Limits – Sensations Episode. It showed an incredible example of a dentist using hypnosis on a man getting a filling. He gets his tooth drilled and filled and feels no pain. It explained how hypnosis can do this! It was really cool to see.
Here is another interesting article about hypnosis. The Truth and the Hype of Hypnosis.