Models where dark matter and dark energy interact with each other have been proposed to solve the coincidence problem. We review the motivations underlying the need to introduce such interaction, its influence on the background dynamics and how it modifies the evolution of linear perturbations. We test models using the most recent observational data and we find that the interaction is compatible with the current astronomical and cosmological data. Finally, we describe the forthcoming data sets from current and future facilities that are being constructed or designed that will allow a clearer understanding of the physics of the dark sector.