Ketamine is a dissociative anesthetic. It is a type of drug a doctor might give to put someone to sleep for an operation. Ketamine can  also be used as a painkiller and a bronchodilator (which makes it easier for air to get into your lungs). 
Sometimes it can lead to a special type of hallucination which makes you feel detached from yourself and the things around you which is why some people use it as a recreational drug. As it can have severe side effects, it is usually not available as an over-the-counter drug.

Ketamine was developed in 1962 as a rapid-acting dissociative anesthetic that was used in surgery. It was approved for human use by the Food and Drug Administration (FDA) in 1970. Unfortunately, abuse began along the West Coast and spread across the country by the 1980s. The illicit market produced new forms of the drug, available as powder, capsules, crystal rocks, tablets, and injectable solutions. The drug is largely abused intranasally (via sniffing) or orally.

Medical use

The World Health Organization (WHO) lists ketamine as an essential medicine, especially as an anesthetic and analgesic. With medical supervision, ketamine is a better surgical anesthetic than many others, and it is safer for a wider range of patients. It is also the anesthetic of choice in veterinary surgery. In medicine ketamine is normally injected into a vein or muscle.
Ketamine is not the first anaesthetic a doctor would think of using in most situations because of the hallucinations it causes. On the other hand, while most anaesthetics suppress your breathing, resulting in the need for a machine to help you breathe, ketamine does not.
This can make it a useful anaesthetic when you don't have any equipment available, for example, in a war zone.

Side effects

Short term

Short term side effects happen in about 40% of people and include:

 Dizziness
 Double vision
 Euphoria
 Blurred vision
 Finding it hard to express emotions, not being very emotionally reactive
 High blood pressure
 Fast heart beat
 Feeling sick and vomiting
 Having trouble understanding or producing speech
 Nightmares
 Illusions
 Hallucinations
 Changed body image
 Impaired memory and attention
Derealization, or losing touch with reality
Muscle rigidity.

Long term

In the medical setting ketamine is only given a few times so most long term effects mentioned below are found in recreational ketamine users and animal models.

Urinary tract effects
There are 110 reports of people with problems in their urinary tract due to using ketamine.

Symptoms include:

 Urgently needing to urinate.
 Finding it painful to urinate and having blood in your urine. 
 Not being able to hold as much urine in your bladder

These urinary tract problems are most common in people who have abused ketamine daily for a long time.

Neurological effects

People who abuse ketamine a lot (more than 4 times a week) have been found to have impaired memory and increased depression when compared to people who don't abuse ketamine. Those who use ketamine less frequently (1-4 times per week)and those who had stopped taking ketamine showed no difference in the aforementioned parameters. This suggests that these problems with memory and mood do not affect infrequent users and might be reversible once ketamine use is stopped.

One study has recently been done using monkeys as a model to see if ketamine is toxic to the brain.
The study found that injecting the monkeys every day for 6 months with ketamine caused more cells to die in the front of their brain and also caused a decrease in activity in the areas of the brain which control movement.

Mechanism of action
Ketamine is a NMDA antagonist in the CNS. By inhibiting NMDA receptors in inhibitiory neurons in the brain, it causes increased CNS activity and sympathomimetic effects. As a result, there is not only an anaesthetic effect, but also activation of the CNS unlike other anaesthetics. This is beneficial in surgical settings because it maintains blood pressure, airway reflexes, bronchioles remain dilated and airways patent. Making this a particularly useful drug in shock and surgery patients because of blood pressure maintained with ketamine use, unlike typical anaesthetics which cause decreased BP and respiratory suppression.

Research

Treating addiction
One study by Evgeny Krupitsky has found that using ketamine along with psychotherapy and group therapy was a lot more effective at treating alcohol addiction than the traditional treatment.
The same scientist found that ketamine might also be useful for treating heroin addiction. Patients who had been treated for their addiction with multiple sessions of ketamine fared much better than those who had only had one session of ketamine with abstinence rates of 50% and 22.2% respectively.

As an antidepressant
Some small studies have been done which found that a single dose of ketamine was able to improve treatment resistant depression after just a few hours with the effects lasting for one week. The rapid anti-depressant effects of ketamine may prove to be a useful alternative compared to current anti-depressants which can take several weeks to have their effects.

Complex regional pain syndrome
CRPS is a disease that causes severe pain and swelling, getting worse over time.
Some studies have been done which suggest that ketamine might be useful as a painkiller for CRPS.

References

Drugs