When God made the world, he made the first men (ancestors to the human race), the first monsters (ancestors to the supernatural) and the first children (ancestors to elves and fairies) amongst the planet itself and other things.
One of the 80 first men, Joeseph Strauss, requested to the children that they make a blade for him that would enable him to win his battle for the land that would later become Hades. In return for his kindness and fight for their survival, the children began work on the metal that would later become Valyrian Steel and the substance that would later become Mountain Ash.
The children took regular steel and heated it close to 3000K so it was near it's boiling point using the flames of a powerful dragon. They then used an abundance of enchantments, sea-stone and sprinkled the ashes of what was a dead phoenix. An enchanted mine that replicates the process in it's own way whilst achieving the same result was then created and buried deep within the mountain ranges of Hades (this is not known by many people though).
Fairies of the present day still create Valyrian Steel but it as not as strong as the metal found in the mine due to the lack of Phoenix Ashes.
Valyrian Steel produced by modern fairies is nigh invulnerable, in order to create a scratch, 600 septillion megatons of force would be required and to melt it, 4,000,000K is required. Depending on the blacksmith and wielder, a weapon created from Valyrian Steel should be able to cut through anything and bullets made from the enchanted metal have shown the capability of travelling and never stopping. Valyrian Steel from the mine however is completely indestructible.
The metal is extremely dense meaning swords that should weigh 2.5lbs instead weigh a total of 25lbs, because of this, bullets made of the substance and extremely hard to manufacture.
Because of it is part sea-stone, Valyrian Steel is very harmful to devil fruit users and has been known to drain their abilities very quickly.