The son of a niece is called a "great-nephew." The child refers to the aunt or uncle of his mother as his "great-aunt" or "great-uncle."
While sons and daughters are directly descended from parents and grandparents, "collateral" relationships indicate connections where there is no direct line of descent between the individuals. This includes aunts, uncles, nieces and nephews. The term "great" indicates that there is an additional generational difference among the relatives in question. Therefore, a "nephew" is the son of a sister or brother. "Great-nephew" indicates that the next generation -- the child of a niece or nephew -- is being identified.