Melatonin was recently added, and was quite an interesting topic to research. First, despite being the 'circadian hormone' secreted from our pineal gland it is found in many different foods, particularly wine. It is also synergistic with resveratrol also in wine, which adds to the huge list of things in wine that are synergistic with each other (grapes appear to be magical).
In regards to the 'caveat' comment in the title, under the Neurology section pertaining to sleep are sections on Tolerance, Withdrawal, and Dependence.
Melatonin does not appear to exert tolerance over 6 months of usage, it does not appear to be associated with withdrawal nor dependence. Melatonin does appear not suppress endogenous synthesis of melatonin in otherwise healthy persons.
The benefits of melatonin supplementation may leave rather abruptly after cessation though. If you have a few months of melatonin induced sedation and then you go back to 'normal' it may appear that withdrawal (reactive imsomnia) exists when you are just normal again. So be aware of that possibility.
It appears to be quite safe. A few human interventions using 100mg or so (depending on the dose you choose, about 20-200x the active dose) with no side effects aside from sedation.
There are many health benefits assosiated with Melatonin as well, and these may be secondary to interactions with other hormones; melatonin can increase the secretion of leptin and growth hormone fairly reliably which may be a link between why sleep is good for fat loss.
Finally, it does not improve sleep quality per se and is quite unreliable in doing so. It reliably decreases sleep latency, or the time it takes to fall asleep; this may or may not improve sleep quality (wave patterns, REM density, etc) but is a reason why melatonin and melatonin agonists are primary treatment for insomnia.
For more information, see how important sleep is and ten tips for better sleep.