The quark model was formulated in 1964 to classify mesons as bound states made of a quark-antiquark pair, and baryons as bound states made of three quarks. For a long time all known mesons and baryons could be classified within this scheme. Quantum Chromodynamics (QCD), however, in principle also allows the existence of more complex structures, generically called exotic hadrons or simply exotics. These include four-quark hadrons (tetraquarks and hadronic molecules), five-quark hadrons (pentaquarks) and states with active gluonic degrees of freedom (hybrids), and even states of pure glue (glueballs). Exotic hadrons have been systematically searched for in numerous experiments for many years. Remarkably, in the past fifteen years, many new hadrons that do not exhibit the expected properties of ordinary (not exotic) hadrons have been discovered in the quarkonium spectrum. These hadrons are collectively known as $XYZ$ states. Some of them, like the charged states, are undoubtedly exotic. Parallel to the experimental progress, the last decades have also witnessed an enormous theoretical effort to reach a theoretical understanding of the $XYZ$ states. Theoretical approaches include not only phenomenological extensions of the quark model to exotics, but also modern non-relativistic effective field theories and lattice QCD calculations. The present work aims at reviewing the rapid progress in the field of exotic $XYZ$ hadrons over the past few years both in experiments and theory. It concludes with a summary on future prospects and challenges.