I discuss melatonin's effects on sleep & its safety; I segue into the general benefits of sleep and the severely disrupted sleep of the modern Western world, the cost of melatonin use and the benefit (eg. enforcing regular bedtimes), followed by a basic cost-benefit analysis of melatonin concluding that the net profit is large enough to be worth giving it a try barring unusual conditions or very pessimistic safety estimates.
Full essay: http://www.gwern.net/Melatonin
I've been prescribed melatonin recently myself, and it's not helping me much. Here are my theories on the subject.
Melatonin is good for (at least) one thing: if you don't fall asleep naturally, either at all or at a convenient time, taking melatonin can help fix that. ("Naturally" here means you feel tired and sleepy and genuinely want to go to sleep, so you don't need to invest will to do so.)
A high level of melatonin tells your body to fall asleep. If you take melatonin at a time during the day when your body produces melatonin already, then the extra-high level may not make any difference. In other words, if the reason you had trouble falling asleep isn't low levels of melatonin but some unrelated physiological problem, then there's no point in raising levels.
The second possible scenario is what I appear to have. I have a natural sleep schedule that's at odds with the day cycle. Left alone (e.g. during summer break), I wil go to sleep at 2am and wake up at noon. If I take melatonin at 10pm, I can fall asleep at 11. But my body still produces its own melatonin until noon, so I don't wake up earlier - the net effect is that I sleep 14 hours and wake up tired.
The doctor said if I keep taking melatonin at a fixed time every day for half a year, my body may adjust its own melatonin-producing cycle to match. More likely it won't, but there's no alternative treatment that I know of. So far I've bee taking it for one month with only modest (possibly statistically-insignificant) improvement.
BTW, my prescribed dose is 5mg daily, higher than usual. The doctor said there are still no side effects ever reported, even with higher dosages. He's a sleep expert, not a GP, so that has some credibility.
I'm interested in hearing more ideas, stories, ...
If the melatonin works for the "falling asleep" part of the problem, why not simply use an alarm clock to wake yourself up after your desired number of hours of sleep?