Legitimate and Illegitimate Amulets
Abdullah bin Mas'ud, may Allaah be pleased with him, said: I heard the Messenger of Allaah (sallallaahu alaihi wa sallam) say: Verily, incantations, amulets and Tiwalah are Shirk.  Jabir, may Allaah be pleased with him, said:I had an uncle who used to treat people with incantations for the scorpion's sting. When the Prophet (sallallaahu alaihi wa sallam) forbade incantations, he came to him and asked him: O Messenger of Allaah, You have forbidden incantations, and I treat those who are stung by scorpions with incantations. He (sallallaahu alaihi wa sallam) said: He who can help his brother, let him do so.  How do we compromise between the Hadith which forbids, and that which permits? And what is the ruling on wearing an amulet containing Qur'anic words on the chest of the affected person?
The forbidden formulas for incantations are those containing Shirk, beseeching other than Allaah, or meaningless words. But incantations that are free from such things, are legitimate, and are among the great means of healing. The Prophet (sallallaahu alaihi wa sallam) said: There is no harm in incantations as long as they do not include Shirk.  And he (sallallaahu alaihi wa sallam) said: He who can help his brother, let him do so. He also said: No incantation for other than the envious eye or venomous sting.  This means the most affective and beneficial incantation is that which is used in these two cases. The Prophet (sallallaahu alaihi wa sallam) was himself treated with incantation, and he treated others with it. As for wearing amulets by children and patients, it is not permissible. Such are called trinkets. But the most valid opinion is that they are a form of Shirk, and unlawful, because the Prophet (sallallaahu alaihi wa sallam) said: He who wears an amulet; may Allaah not help him, and he who wears a shell; may Allaah not protect him.  He who wears an amulet commits Shirk. And he (sallallaahu alaihi wa sallam) said: Verily, incantations, amulets and Tiwalah are Shirk.  The scholars are at variance regarding the legality of wearing amulets containing Qur'anic Verses. The correct verdict is that they are unlawful, for two reasons: 1. The general prohibition of wearing any kind of amulets according to the Prophetic traditions whether they contain Qur'anic Verses or not. 2. Leaving no room for formulas of Shirk, for if the amulets containing Qur'anic verses were allowed then they may be confused with the other amulets, and that will keep the door open to Shirk, and all kinds of amulets would be worn on that ground. It is known that closing the door to things that lead to Shirk and evil deeds is one of the greatest judicial objectives. It is Allaah who grants success.
 Abu Dawud no. 3883, Ahmad 1:381 and Al-Hakim 4:418  Muslim no. 2199 Muslim no. 2200  Muslim no. 2199  Al-Bukhari no. 5705 and Muslim no. 220  Ahmad 4:154 and Abu Yaýla no. 1759. See Majmaýuz-Zawaýid 5:103  Ahmad 4:156 and Al-Hakim 4:417. See Majmaýuz-Zawaýid 5:103  Abu Dawud no. 3883, Ahmad 1:381 and Al-Hakim 4:418
Shaykh `Abdul-`Azeez Bin Baz
Fatawa Islamiyah Vol. 1 Page 40
Taken from: http://www.fatwaislam.com/fis/index.cfm?scn=fd&ID=1095