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The "magic salve" that was used by humans to transform into wolves was a strong hallucinogenic. When rubbed over the body, it is absorbed into the bloodstream and causes effects similar to LSD. A person under the salve's effect could imagine that he was anything, or anyone.   One reason that people during the Medieval Times imagined themselves as werewolves, as opposed to other things, is because of the mass hysteria over werewolves during this time.

Another explanation of werewolves comes from within the human brain.  Temporal lobes in the brain control sensations in the human body, and any irritation of the temporal lobes can cause hallucinations.  Also, if a person has shrunken temporal lobes, they can be subject to complex partial seizures.  These seizures can lead to fixed delusions.  Such delusions can include  a person thinking that they are a wolf.  Also, a lack of nutrition or a hit on the head can cause complex partial seizures. 

During the period from 1520 to 1630 there were over 30,000 werewolf trials in France alone.  Most of the people who were tried as being werewolves were poor, and came from lowlands with elevations less than 500 feet above sea level.  A recent theory is that many of the werewolf accusations were a result of a fungus found in their rye crop.   Rye bread was a staple for the poorer people of France, and after cold winters the rye developed the Ergot fungus.  Unbeknownst to them, the fungus was a strong hallucinogenic.  This theory contests that the werewolf hysteria was a result of mass hallucination since most of the accusers and the accused were poor.  The wealthy staple was the more expensive wheat, which was immune to the Ergot fungus.  This explains why the wealthy were immune from the werewolf hysteria.