Placebos originated as sugar pills given to patients who might or might not get better simply by believing the pills would work. Today, a placebo is (generally) a pill that looks just like a real medication but has no active ingredients. It is used in clinical trials to test the effectiveness of the medication. If the medicine is in liquid, powder or capsule form, the placebo takes the same form. Researchers can also evaluate the frequency of side effects by comparing reactions of the true medication to the placebo.
For more, including information on "active" placebos, see What is a Placebo?
Also see Surprising Information About Placebos.