They started out as simple amp modelers, but have evolved very rapidly. I own one of the first generation Pods (the first commercial guitar amp modeler) and a very current modeling amp from Fender (a Mustang III). We're talking guitar amplifiers, of course. These days, they don't just model amps, they model the response of those amps, the effects in those amps, the speakers in (and not in) those amps, and more. And the best of them are very, very good at it.
The magic of tube guitar amps is the bane of hifi -- clipping. In a guitar amp, it can turn the amplifier into an extension of the musical instrument, giving the player dynamic control over "overdrive" or soft clipping, just through the strength of his attack on the strings. The tone of tubes is also pretty fabulous for guitars. I've never played anything but tubes outside of the house until this year, when I bought the Mustang. My beloved vintage Fender Deluxe Reverb is in retirement.
With this digital modeling amp, I can not only choose from a very fine collection of amp models, allowing me to play a clean Fender Twin Reverb for a rhythm part and switch to an overdriven Vox AC-30 Top Boost for the solo, but I can create combinations that never existed -- a Deluxe (a 1X12 combo) playing through a 4X12 Mashall cabinet, for example. This not only changes the the tone, it changes the load the Deluxe is playing into, altering its response to effects, to tone and volume adjustments on the guitar and the amp and even to my playing technique. I can take it a step further and play a Vox through that Marshall 4X12 cabinet, with the reverb circuit from a vintage Fender reverb unit. I can go a step even further and adjust the virtual bias of the amp to give it more or less "sag" -- another thing that is badd in hifi but can be useful in a guitar amp. I can place effects before the amp or in the FX loop between pre and power, and the impact it has on tone is exactly the same as it is with physical placement of actual effects pedals. I suppose it's hard to understand how powerful all this is if you're not a player. I plug my amp into my laptop, load up the software, manipulate models, save them as presets, and then play as if I have a whole collection of vintage amps on stage with instantly switchable adjustments. It's more like magic than technology.
This is not simple stuff. These modeling amps control an incredible amount of nuance, and I have no doubt that this technology could be very successfully applied to hifi and even to environmental acoustic modeling. But it would take significant R&D, and would be targeted to a market that thinks tone controls are a bad thing and digital processing is the spawn of the devil.
I won't be holding my breath.
Tim