The proliferation of mods for games is commonly cited as one of the top reasons for choosing PC gaming over consoles. It's still very compelling, but it's impossible to overlook the fact that this generation of games has not had its version of Counter-Strike, which had its first proper beta release in 1999 for Half-Life. That mod is still the most popular first person shooter on the internet by a healthy margin of about 100,000 simultaneous players at any particular point in time. The only other game that comes close is Counter-Strike: Source, the follow-up that uses Half-Life 2's engine. Why hasn't anything been able to challenge the primacy of CS?
When Counter-Strike burst onto the scene, broadband connections were just starting to reach critical mass in the United States, Europe and Asia. Half-Life was a massive hit thanks to its single-player game, although the multiplayer offered little else but rudimentary deathmatch. This ensured that it would have a strong installed base. It had some strong competition that same year in the winter from multiplayer focused shooters like Unreal Tournament and Quake 3, but the first CS public beta had already come out in the summer, and Half-Life itself had been released since the end of 1998. This gave it a strong first mover advantage that has yet to dissipate.
There are still new games getting close to the top of the multiplayer shooter charts - Call of Duty 4 being the standout example - but no mods have managed to fill the niche that CS did. Graphics were less advanced than they are today, and were relatively easier to put together at a level close to professional industry standards with a hobbyist's level of skill. The shooter market was also far less crowded. CS has reaped the benefit of a large installed user base and an active competitive scene for years.
Mods are occupying a different sort of niche than they did at the turn of the century. Now, successful mod projects are held up additions to an amateur developer's CV - they're more like self-advertisements than games that anyone really expects will take off commercially. Most mod projects end up never getting off the ground as they encounter management issues. It's hard to recruit people to put in enough time to a project that will rival a full time job. Even so, many people are still putting out mods like Zombie Master and Eternal Silence to small audiences of appreciative gamers.