Is there a medicinal effect of essential oils?

Possibly: It depends on what you're using the essential oil for, but there are some positive studies. For instance, the use of lemon balm oil (melissa officinalis) for severe agitation in dementia: http://tinyurl.Com/p9xn2ky this one used 71 patients. 60% of the active treatment group vs 14% of the placebo group had reductions in agitation scores.

Unknown: By definition, "alternative" is different than modern western medicine. Generally any drug, herb, treatment, or procedure that stands up to rigorous scientific scrutiny is included in modern medicine. The problem is that many alternative practices, oils etc do not stand up to scientific scrutiny and cannot be shown to work. Check: http://nccam.Nih.Gov/ for unbiased information and don't waste $$