Abstract. Recent months have witnessed dramatic progress in our understanding of short γ-ray burst (SGRB) sources. There is now general agreement that SGRBs -or at least a substantial subset of them -are capable of producing directed outflows of relativistic matter with a kinetic luminosity exceeding by many millions that of active galactic nuclei. Given the twin requirements of energy and compactness, it is widely believed that SGRB activity is ultimately ascribable to a modest fraction of a solar mass of gas accreting onto a stellar mass black hole or to a precursor stage whose inevitable end point is a stellar mass black hole. Astrophysical scenarios involving the violent birth of a rapidly rotating neutron star, or an accreting black hole in a merging compact binary driven by gravitational wave emission are reviewed, along with other possible alternatives (collisions or collapse of compact objects). If a black hole lies at the center of this activity, then the fundamental pathways through which mass, angular momentum and energy can flow around and away from it play a key role in understanding how these prime movers can form collimated, relativistic outflows. Flow patterns near black holes accreting matter in the hypercritical regime, where photons are unable to provide cooling, but neutrinos do so efficiently, are discussed in detail, and we believe that they offer the best hope of understanding the central engine. On the other hand, statistical investigations of SGRB niches also furnish valuable information on their nature and evolutionary behavior. The formation of particular kinds of progenitor sources appears to be correlated with environmental effects and cosmic epoch. In addition, there is now compelling evidence for the continuous fueling of SGRB sources. We suggest here that the observed late flaring activity could be due to a secondary accretion episode induced by the delayed fall back of material dynamically stripped from a compact object during a merger or collision. Some important unresolved questions are identified, along with the types of observation that would discriminate among the various models. Many of the observed properties can be understood as resulting from outflows driven by hyperaccreting black holes and subsequently collimated into a pair of anti-parallel jets. It is likely that most of the radiation we receive is reprocessed by matter quite distant to the black hole; SGRB jets, if powered by the hole itself, may therefore be one of the few observable consequences of how flows near nuclear density behave under the influence of strong gravitational fields.