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In this video:

Catnip, which is a perennial herb in the mint family, contains a chemical called “nepetalactone” that is released when catnip is crushed. When cats get a whiff of nepetalactone, most will start rubbing themselves against it, playing around with it, sometimes eating it, and generally will act quite bizarrely. It is thought, but not known exactly, that this chemical mimics certain feline pheromones, specifically their theoretical facial pheromones (it isn’t known whether these actually exist, but many researchers think so, which is why cats probably like to rub their faces on various things).

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Sources:

http://animals.howstuffworks.com/pets...
http://vetmedicine.about.com/cs/obedc...
http://en.wikipedia.org/wiki/Nepetala...
http://chemistry.about.com/od/medical...
http://www.instructables.com/id/DIYK...
http://en.wikipedia.org/wiki/Nepeta_c...
http://animals.howstuffworks.com/pets...
http://en.wikipedia.org/wiki/Cat_pher...
http://www.todayifoundout.com/index.p...
http://www.todayifoundout.com/index.p...
http://pdphoto.org/PictureDetail.php?...