In Traditional Chinese Medicine (TCM), Huo Xiang belongs to the 'Aromatic herbs that transform Dampness' category. This category of herbs resolves a TCM condition called 'Cold Damp Stagnation', especially as it affects the Stomach and Spleen. In modern medicine this often translates into symptoms such as distended chest and abdomen, lack of appetite, nausea and vomiting
As suggested by its category Huo Xiang is Warm in nature. This means that Huo Xiang tends to help people who have too much 'Cold' in their body, although with less effect than a plant that would be Hot in nature. Balance between Yin and Yang is a key health concept in TCM. Those who have too much Cold in their body are said to either have a Yin Excess (because Yin is Cold in nature) or a Yang Deficiency (Yang is Hot in Nature). Depending on your condition Huo Xiang can help restore a harmonious balance between Yin and Yang.
Huo Xiang also tastes Pungent. The so-called 'Five Phases' theory in Chinese Medicine states that the taste of TCM ingredients is a key determinant of their action in the body. Pungent ingredients like Huo Xiang tends to promote the circulations of Qi and Body Fluids. That's why for instance someone tends to sweat a lot when they eat spicy/pungent food.
The tastes of ingredients in TCM also determine what Organs and Meridians they target. As such Huo Xiang is thought to target the Lung, the Spleen and the Stomach. In addition to performing respiration, the Lungs are thought in TCM to be a key part of the production chain for Qi and the Body Fluids that nourish the body. The Spleen on the other hand assists with digestion, Blood coagulation and Fluids metabolism in the body. The Stomach is responsible for receiving and ripening ingested food and fluids. It is also tasked with descending the digested elements downwards to the Small Intestine.