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Acute exposure to nitrous oxide is known for inducing short-term effects that include euphoria and changes in sensation. This gas acts as a dissociative anesthetic, often leading individuals to experience feelings of happiness, detachment, and alterations in their perceptions of time and space. The euphoric effects are part of what makes nitrous oxide popular in recreational settings, as it can create a temporary, intense feeling of well-being. The sensory changes can include distortions, such as altered sound perceptions or visual shifts, which contribute to the overall experience.

The other options do not align with the typical effects of nitrous oxide exposure. Long-term memory loss is generally not associated with acute nitrous oxide use in the way that euphoria is. Increased alertness is not a characteristic response; rather, the gas tends to produce a relaxed or lethargic state depending on the dosage and context of use. Chronic headaches can occur from various causes but are not a direct and immediate result of acute nitrous oxide exposure. Thus, the defining effect of acute exposure is indeed characterized by short-term euphoria and changes in sensation, validating the selection of that answer.