Modular means that you can plug different interface modules into the router. That means in one router you could have ethernet, serial, ATM, and token ring. In the past, that might require 4 routers because the interfaces were fixed. A large majority of Cisco routers are modular with the most popular being the ISR (Integrated Services Routers). The interfaces come on fixed hardware modules such as WIC or NM (network module). The 7200 has a different hardware configuration and instead of WICs and NMs it use PACs (port adapter cards).
Hope that helps.
