Essential oils are generally extracted by distillation, often by using steam from the leaves, stems, flowers, barks, roots. Essential oils are not really oils. They do not contain the fatty acids that constitute what we would consider an actual oil. Essential oils are not the same as perfume or fragrance oils. Essential oils are derived straight from the plant, whereas perfume oils are artificially created or contain artificial substances.

Essential oils have been used medicinally in history. Medical applications range from skin treatments, warding off colds, fevers, insects, etc.

Essential oils can be used therapeutically by:

• Diluting it with a carrier oil and applying it to the skin. I often add essential oils to my home-made beauty products such as lotions, etc.
• Inhaling it.
• Ingesting it. Not all essential oils can be ingested, make sure that you are using a high-grade such as young living and also make sure that the specific oil can be safely ingested.

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More info on Essential Oils
Wikipedia
21 Things you should know about using essential oils