The analysis of complex biological networks has traditionally relied on decomposition into smaller, semi-autonomous units such as individual signaling pathways. With the increased scope of systems biology (models), rational approaches to modularization have become an important topic. With increasing acceptance of de facto modularity in biology, widely different definitions of what constitutes a module have sparked controversies. Here, we therefore review prominent classes of modular approaches based on formal network representations. Despite some promising research directions, several important theoretical challenges remain open on the way to formal, function-centered modular decompositions for dynamic biological networks.