In a single process, the merger of binary neutron star systems combines extreme gravity, the copious emission of gravitational waves, complex microphysics and electromagnetic processes, which can lead to astrophysical signatures observable at the largest redshifts. We review here the recent progress in understanding what could be considered Einstein's richest laboratory, highlighting in particular the numerous significant advances of the last decade. Although special attention is paid to the status of models, techniques and results for fully general-relativistic dynamical simulations, a review is also offered on the initial data and advanced simulations with approximate treatments of gravity. Finally, we review the considerable amount of work carried out on the post-merger phase, including black-hole formation, torus accretion onto the merged compact object, the connection with gamma-ray burst engines, ejected material, and its nucleosynthesis.