Codeine is the most widely used, naturally occurring narcotic in medical treatment in the world.  It is found in opium, but most codeine used in the US is produced from morphine.  It is also the starting material for the production of two other narcotics, dihydrocodeine and hydrocodone.

Codeine is a medically prescribed narcotic for the relief of moderate pain and cough suppression.  Compared to morphine, codeine produces less analgesia, sedation, and respiratory depression, and is usually taken orally.  It is made into tablets either alone (Schedule II) or in combination with aspirin or acetaminophin (i.e. Tylenol with Codeine, Schedule III).

As a cough suppressant, codeine is found in a number of liquid preparations (Schedule IV).  It is also used to a lesser extent as an injectable solution for the treatment of pain.

Codeine products are diverted from legitimate sources and are encountered on the illicit market.

As with other opiate based pain killers, codeine may result in physical dependence with chronic use and cause withdrawal symptoms if use is discontinued abruptly.

Sources:

Codeine, http://www.justice.gov/dea/concern/codeine.html (last visited Sept. 22, 2011)