It induces euphoria, and excites the sexual regions of the brain. It is quite possibly hallucinogenic. It leads to strange, unpredictable, and unproductive behavior in those who use it. What's more, it grows wild, much as a weed. Is this the latest menace to society? No, it's catnip.
The catnip plant is actually an herb, and a relatively common member of the mint family. If kitties ever decided to have a war on drugs, catnip would be outlawed because of a chemical called "nepetalactone."
Lactones carry chemical messages inside a body, and nepetalactone carries it's message straight to the pleasure center of a cat's brain, where it can randomly excite the cat's neural circuits associated with sex, playing, hunting, and feeding.
Although a cat may try to eat catnip or a catnip toy, it is only the smell of catnip that transfers the drug to a cat's brain, not the actual ingestion. This is why a small amount of catnip inside a toy can make a cat happy again and again. It's also why a cat will sometimes be more interested in the cardboard box that a catnip toy came in than the actual toy--the cardboard might carry more of the smell.
If your cat seems unaffected by catnip, don't worry. A cat's sensitivity to catnip is genetically determined, and some don't respond at all.