There is definitely some craze going on for coconut oil both in the healthy eating space (often claimed to be the healthiest oil to cook with but this is a topic for another site) and in the skin and hair care space.
We will talk here about the latter two and see why we might want to smear it all over ourselves. Chemically speaking, coconut oil has a unique fatty acid profile. Unlike many plant oils that mostly contain unsaturated fatty acids (fatty acids with double bonds and kinky structure such as linoleic or oleic), coconut oil is mostly saturated (fatty acids with single bonds only) and its most important fatty acid is Lauric Acid (about 50%). Saturated fatty acids have a linear structure that can stack nice and tight and hence they are normally solid at room temperature. Coconut oil melts around 25 °C so it is solid in the tub but melts on contact with the skin.
The saturated nature of coconut oil also means that it is a heavy-duty-oil ideal for dry skin types. A double-blind research confirmed that extra virgin coconut oil is as effective in treating xerosis (aka very dry skin) as mineral oil. Another study found that coconut oil is more effective than mineral oil in treating mild to moderate atopic dermatitis (aka eczema) in children.
So when it comes to dry skin, coconut oil is a goodie, no question there. The question is if it is good or bad for acne-prone skin. Its main fatty acid, Lauric Acid has some research showing that it is a promising ingredient against evil acne-causing bacteria, P. acnes but at the same time, both Lauric Acid and coconut oil have a very high comedogenic rating (4 out of 5). Though comedogenic ratings are not very reliable, anecdotal evidence (i.e. people commenting in forums) shows that people have mixed experiences. While some claim that it worked wonders on their acne others say that it gave them serious blackheads and zits. Try it at your own risk.
As for hair care, coconut oil has pretty solid research showing that it can penetrate into the hair very well (better than mineral oil and sunflower oil) and it can prevent hair protein loss as well as combing damage. If you have problems with damaged hair, split ends, coconut oil is worth trying as a pre- or/and post-wash treatment. Labmuffin has an awesome blogpost explaining in more detail why coconut oil is good for your hair.
A couple of other things worth mentioning: coconut oil might help with wound healing (promising animal study), it has some antifungal activity (against dermatophytes that cause the thing known as ringworm) and it also works as an insect repellent against black flies.
Overall, coconut oil is definitely a goodie for the hair and dry skin. If that warrants for the magic oil status it enjoys, we don't know.
