Coriolus versicolor may well be the most common mushroom in the world. It grows on dead wood from the rain forest to the taiga.
When one considers Coriolus competing against so many different fungi and bacteria in such diverse environments, its obvious that it must have a powerful immune system, with the potential for powerful medicinal compounds.
In Oriental medicine, Coriolus extract is used as a remedy for liver cancer and jaundice.  To modern medicine, the best researched medicinal compound from Coriolus is known as PSK. Under the brand name Krestin, PSK is used in Asia as a cancer drug. 
In the 1990’s, two Japanese studies including 486 patients reported increased survival when PSK was used as an adjunct to chemotherapy for gastric cancer. [161, 162, 163] Other studies have shown that PSK reduces metastasis and cancer recurrence. [161, 162, 164]
Two other polysaccharides from Coriolus versicolor extract have been found to have an inhibitory effect on leukemia. The polysaccharide CVP was shown to inhibit leukemia cell proliferation without any negative effect on normal lymphocytes. [165, 166, 167] Another smaller polysaccharide named SPCV also had an inhibitory effect on leukemia cells. 
Coriolus versicolor extract appears to combat cancer in two ways:
1) By directly inhibiting cancer cell growth and proliferation.
2) Through stimulating Natural Killer (NK) cells in humans. [169, 170, 171] NK cells are a vital part of the human immune system’s cancer fighting arsenal.
Though the effectiveness against different forms of cancer varies, PSK is currently used to treat cervical cancer in conjunction with radiation. Studies have linked it to increased survival rate from cervical cancer.  It also decreases tumor cell regeneration in hormone responsive prostate cancer, as demonstrated in a 2001 study at New York Medical College. 
Other forms of cancer that PSK has been tested against with promising results include breast, lung and colon cancer. [25, 173] It appears ineffective against Sarcoma 180. 
In addition to its anti-cancer properties, PSK is also a potent antibiotic against Candida albicans, Staphylococcus aureus, Escherichia coli, Pseudomonas aeruginosa, Listeria monocytogenes and Cryptococcus neoformans. [175, 176, 177, 178, 179]
Another compound (PSP) isolated from Coriolus versicolor has been shown to inhibit HIV replication  and infection  under lab conditions. It has not been tested on live patients.
A 1995 study on PSK reported a normalization of immune function in cases of chronic rheumatoid arthritis. 
Paul Stamets mentions in his book Growing Gourmet and Medicinal Mushrooms that he’s aware of several individuals with Hepatitis C benefitting from a medicinal mushroom tea. He relates a story of a man whose HCV (Hepatitis C Virus) value decreased from 1.3 million to 140,000 after two weeks of drinking a tea made from Coriolus versicolor (Turkey Tail Mushroom) and Ganoderma lucidum (Reishi). 
Coriolus versicolor is also a rich source of antioxidants and has been reported to help the spleen recover from radiation therapy induced injury. 
Finally, in the book Mycelium Running, Paul Stamets lists two additional areas of promising research on Coriolus versicolor: Kidney health and uterine cancer. 
Note: The statements on this page have not been evaluated by the Food and Drug Administration. This article is not intended to diagnose, treat, cure or prevent any disease. Never use any herb (or mushroom) except as advised by a licensed medical practitioner.
Credit to Paul Stamets for research and source material.