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The main benefits of simulation modelling are (Chung, 2004):

Experimentation in limited time

Reduced analytical requirements

Easily demonstrated models

The main limitations are (Chung, 2004):

Simulation cannot give accurate results when the input data are inaccurate

Simulation cannot provide easy answers to complex answers

Simulation cannot solve problems by itself

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Gray (2002) suggests that "all simulation is pretend".. And students are never really subjected to the consequences for mistakes which may result in students under performing and not being fully engaged in the training, thus producing inaccurate results. 

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Gray (2002) suggests that "all simulation is pretend".. And students are never really subjected to the consequences for mistakes which may result in students under performing and not being fully engaged in the training, thus producing inaccurate results. 

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Liu and Su, (2011) found that simulations loaded with multimedia features like audio, video and different formats of information increase the cognitive workload thereby affecting learning. Lee et al., (2007) concluded that computer based simulations produced different cognitive impact on learners depending on their prior knowledge and gender (Lee et al., 2007) making them unsuitable for some learners. 

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Liu and Su, (2011) found that simulations loaded with multimedia features like audio, video and different formats of information increase the cognitive workload thereby affecting learning. Lee et al., (2007) concluded that computer based simulations produced different cognitive impact on learners depending on their prior knowledge and gender (Lee et al., 2007) making them unsuitable for some learners. 

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Educational simulations need to offer sufficient feedback streams to learners to fully enable them to anticipate the realities of a real-world situation. Learners should also fully understand the limitations of the simulation, particularly the underlying models. Learners have to understand the amounts of serendipity (and open-endedness) that have been built into the simulation (such as those that involve human-embodied avatars in public virtual spaces).

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Advantages:
easy to simulate the concepts that is hard to observe in real life
Challanges:
Design is time consuming.

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Simulations have many advantages for learning and practice, including the ability to repeat scenarios with specific learning objectives, practice for longer periods than are available in real life, use trial and error, experience rare or risky situations, and clearly measure outcomes with validated scoring systems. For skills development, a simulation’s outcome measures, combined with debriefing and reflection (Crookall 2010), serve as feedback for a formative assessment cycle of repeated performance practice and improvement (Ferry et al. 2005; Girod and Girod 2008).

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Simulations have many advantages for learning and practice, including the ability to repeat scenarios with specific learning objectives, practice for longer periods than are available in real life, use trial and error, experience rare or risky situations, and clearly measure outcomes with validated scoring systems. For skills development, a simulation’s outcome measures, combined with debriefing and reflection (Crookall 2010), serve as feedback for a formative assessment cycle of repeated performance practice and improvement (Ferry et al. 2005; Girod and Girod 2008).

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They raise student interest.They enable a deeper sense of experiential reality for experiences that might otherwise be expensive or dangerous to the student.They enrich the learning.They are often memorable.They offer ways to culminate complex learning.

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Transfer of learning to other situations can be problematic

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Simulation is not always able to completely re-create real-life situations. And if the fidelity drops for just one second it can be very difficult to get the student back into the moment of suspended belief! Some Simulators can be very expensive and require constant updates and maintenance.
It takes effort - 'lots of effort' to create meaningful experiences.