Why N2O is a "laughing gas"?
In contrast to $\ce{O2}$ (or $\ce{CO}$), $\ce{N2O}$ does not bind to hemoglobin and it is not metabolized in the human body. It is taken up through the lungs, gets in the blood and leaves the body the same way being exhaled.

According to a 2004 study by P. Nagele in PNAS (DOI), $\ce{N2O}$ acts as an antagonist for the  $N$-methyl-$D$-aspartate (NMDA) receptor. Other infamous antagonists are drugs like ketamine or phencyclidine.

Further information on NDMA receptor antagonists can be found here.