While modules are technically not required they are very useful and can be somewhat compared to drivers. Due to their possibility of loading and unloading them on the fly they are, in my opinion, even more powerful on Linux than are drivers on Windows.
Modules, as their name implies, modularize the kernel and allow you to load only the support you need – without having to recompile the kernel. In the old days, when you needed additional hardware support for a new device, you would have to recompile the entire kernel (even that is quite easy these days) to add support for that particular device. This is no longer necessary! Just compile the module, load it and you should be set without requiring a reboot in most cases.
A quick note, according to many sources modules run with no slowdown at all, so including something in the core kernel because you think that it's faster does not seem to make much sense.