All UPS systems (at least those that should be used in data centers) use some form of double conversion design that take alternating current AC in, change it to direct current DC which charges the batteries, then re-convert it back to AC.
Many traditional UPS systems have been built this way for years, using rather large "modules", either to create higher capacity systems than were considered practical with single module designs, or to obtain "N+1" redundancy. Three 500 kVA UPSs, for example, could be intended to deliver a maximum of 1,000 kVA, so if any one unit fails or is shut down for service, the full design capacity is still available.
What has occurred in recent years is the use of much smaller modules (10 kVA to 50 kVA) to make up larger UPS systems (from 40 kVA to 1,000 kVA from American Power Conversion Corp., for example). As with anything in engineering there are advantages and disadvantages.
The principle advantages touted for the modular approach are the ability to grow capacity as needed (assuming the right frame size is installed initially) and reduced maintenance cost, since the modules are hot swappable and can be returned to the factory by the user for exchange or repair. I find a third potential advantage which I'll explain later.
Modular systems are also generally designed to accept one more module than is required for their rated capacity, making them inherently "N+1" capable at much lower cost than would be possible with the very large system.
Disadvantages to the modular approach
The disadvantages to modular systems depend on several factors, so my descriptions will tend to be conditional.
The smaller modular systems (up to about 120 kVA) tend to be installed "in-row", as additional cabinets. This means added space and weight in the machine room. Depending on how many cabinet rows are thus equipped, and how their distribution circuits are wired, there may also be a loss of economy of scale because extra capacity in one UPS may not be readily available to another part of the floor that needs it. This can be offset to some extent by moving UPS modules to where they're needed, assuming the frame size is adequate, but over-building with an 80 kVA frame in a row that will never need more than 30 kVA is just not cost-effective.
Next are batteries. Batteries used inside the data center must be valve-regulated lead acid (VRLA). This type of battery is used in the majority of UPS's today, but it carries certain failure risks and lifetime limitations that can add up in replacement costs over time. If you are running a large data center, and prefer the long-term reliability of wet cell lead acid batteries despite their initial cost, construction, and maintenance requirements, then locating smaller UPS's among your cabinet rows will not likely be practical -- running DC any distance requires huge copper wiring that quickly becomes very costly as well as space-consuming. Today, however, you can install large, central systems as either traditional or modular, using whichever type of battery you prefer.
Another factor involves the built-in redundancy of most modular systems. If the frame is fully populated (nine 10 kVA modules in an 80 kVA frame, for example), then there is essentially no problem. If you load beyond 80 kVA you will either receive warning alerts or trip the main circuit breaker, so you should always have the redundancy you bought. However, if the frame is not fully populated, it is your responsibility to manage power so there is always at least one module's worth of unused capacity. Otherwise your redundancy is lost. This is also true when large traditional UPS systems are configured for redundancy, but large system modules don't move around, so their alarm and protection circuits are always properly set.
The biggest debate regarding modular UPS is reliability. It is well known that the more parts in any system, the greater the chance that something will fail. Proponents of traditional UPS will dwell on this factor, but the manufacturers of the newer modular systems have had highly regarded experts run statistical analyses on their systems and can show you both theoretical and field data countering the conventional wisdom. The fact is, today's mainline brand UPS's are all highly reliable. You should probably be weighing other factors more heavily in making a choice.
The last potential advantage to modular UPS systems, to which I alluded earlier, is a relatively new consideration, and that is efficiency. A UPS system runs at highest efficiency when it is near its maximum rated capacity. As load level drops, so does efficiency. The losses may not seem great on the surface, but they it add up, and as we become increasingly concerned about energy waste and cost, this starts to become a consideration.
Modular UPS systems can be configured, and readily re-configured, so they are running close to capacity. Large, traditional UPS systems are usually purchased with all the capacity anticipated for the future, so they often run well below capacity for a number of years, if not forever. Redundancy, however, always means running below capacity which also means reduced efficiency. This can be minimized in an "N+1" modular system through careful power management.
However, with any "2N" redundant configuration, regardless of type, it is always necessary to manage power so that no system is loaded beyond 50% of its capacity, otherwise it will overload if the duplicate, load-sharing system fails. As a result, every UPS running in a "2N" mode operates at less than maximum efficiency. Again, with very careful management, a modular UPS may be configured more closely than a larger, fixed-capacity system, and this might result in some long-term power savings. There are many "ifs", "coulds", and "mays" in this scenario.
To quickly answer your last questions: Both UPS types can be mixed, in either the same or in different zones of the data center. Some people use a traditional UPS as their main source, but use smaller, modular systems as the second source for their most critical dual corded hardware to give it "2N" redundancy without incurring that cost for the entire enterprise.