Hypnosis works by altering your brain's functioning. You do this yourself, under the guidance of a hypnotherapist.
Dr David Spiegel, Professor of Psychiatry and Behavioural Sciences at Stanford University, has conducted brain scan experiments which show that the brain's functioning is affected by hypnosis. Subjects were asked, under hypnosis, to see the colour draining out of a coloured picture, leaving only black and white. His experiment showed that people were not just "going along with the hypnotist" and reporting what they thought they should be perceiving; their brains were actually perceiving the picture in black and white. Dr Spiegel's scientific paper was published in the American Journal of Psychiatry; Discover magazine summarizes the results and gives more background.
A study in Israel on memory using hypnosis gave similar results.
For an excellent, detailed layperson's summary of how hypnotherapy and hypnosis work, see the How Stuff Works article on hypnosis.
Hypnosis and Suggestion has much more excellent material on the science behind hypnosis.
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