Freud sometimes got it right, it seems.
I have the layman's understanding of analysis. But I will give you my opinion on analysis and what happens in normal circumstances. Any analysis or therapy should be done by a trained professional, not by someone reading websites, including this site! There are many kinds of psychoanalysis; Freudian, Jungian, Larcanian, gestalt, cognitive etc...
Sigmund Freud invented the "talking cure" for patients suffering from hysteric disease. In Pre WW I Vienna, a great number of women, and men, suffered from hysteria, (what doctor's like to call essential diseases) diseases with no known cause. But the patients were physically ill. The term, 'it is all in your head', probably started back then. Even today doctor friends have told me that about half of their clients suffer from some sort of mental disorder that causes very real symptoms. People's minds can make them sick. A psychiatrist I taught with wrote an article on psychosomatic diseases when he was a young intern. Freud discovered and classified different parts of the mind/conscious and believed he could cure psychosomatic illnesses.
In therapy, the patient is supposed to talk about their childhood and dreams and eventually transfer his or her repressed feelings onto the analyst . The analyst must be careful of not counter transferring their feelings and reactions back to the patient (one reason the analyst must be professionally trained). The patient is cured by a catharsis - when they can see the problem in a new light.
What are transferences? They are new editions or facsimiles of the tendencies and phantasies which are aroused and made conscious during the progress of the analysis; but they have this peculiarity, which is characteristic for their species, that they replace some earlier person by the person of the physician. To put it another way: a whole series of psychological experiences are revived, not as belonging to the past, but as applying to the physician at the present moment.
The Origins of Transference, Melanie Klein
The Wilkepidia says "Transference is common. Only in a personally or socially harmful context can transference be described as a pathological issue." A good example of this is in the movie The Prime of Miss Brodie. A teacher projects onto her students her own emotions and desires. Everyone projects onto other people and even objects; that is why the ink blot test works. This is why we think of famous people as somehow better than we are; we project onto them our positive thoughts. Beware of any Narcissist therapists who want to "play" with the patient; more harm than good will come out of it.
Recent research points to a possible biological cause; the brain is connected to all of the body, and the nerve cells are involved in disease causes and symptoms (IBS and Diabetes). People and situations can make you sick - because your brain is cooperating with them, accepting their projections. I have heard that fifty per cent of insurance claims for worker's compensation are for work related stress and depression.
New drug therapy can cure many symptoms and cognitive therapy has been proven effective in some cases. Again, see your doctor or a professional therapist.
PDF on Narcissistic Transference and counter-transference
Go to Splitting and Projecting