The documentary I Dream of Wires (2014) [1, 2] provides both an extensive and entertaining summary of the history and state of the art in modular synthesisers.

There is some extremely cool stuff coming out today. Buchla is still making insane gear like this rhythm generator [3, 4]. Some smart friends in London have made a programmable guitar pedal / module that can run Pure Data patches, they also have an Emscripten + Web Audio API powered sharing platform for same patches [5].

[1] http://www.idreamofwires.org/

[2] http://www.imdb.com/title/tt3636334/

[3] https://www.youtube.com/watch?v=W7IVvYWT69g

[4] https://www.youtube.com/watch?v=3OE8qHrRx-g

[5] http://hoxtonowl.com

Edit: [5] is open source software, firmware and hardware

Edit re software vs. hardware: Besides as has been mentioned that comparing software and hardware is a bit silly, I think it's missing the point to argue in favour of one or the other. A few unordered reasons why:

> Learning through making and programming together complement each other in a way only those who've experienced it truly understand.

> It's never been cheaper to buy synth hardware, esp. for the sake of learning e.g. Arduino, MakeyMakey, littleBits. And, it's never been easier to go to a hack space and get taught how to put a synth together (see workshops on http://musichackspace.org, more springing up in Europe at least – where are you, US music hackers?)

> Just like in most fields, the boundaries between software and hardware are becoming less distinguishable, as the Hoxton Owl project [5] clearly shows. This makes it the most exciting time to be interested in both music software and hardware!