Modular reconfigurable robot (MRR) systems have attracted growing attention because of their versatility and ability to operate across diverse domains. Research on MRR systems has made notable progress, evolving from laboratory settings to real-world applications. However, a gap remains in aligning MRR technologies with specific needs, and a comprehensive review of challenges in practical applications is still lacking. To address these issues, this Review adopts an application-oriented perspective. Focusing on locomotion, manipulation, and construction, it proposes a previously unreported perspective centered on real-world demands. The Review outlines these needs and identifies major challenges facing MRR systems, categorized into three areas: general hardware challenges, general software challenges, and application-specific challenges. This Review aims to inform the development of MRR systems from theory to practice through a demand-technology-application approach. By working backward from practical applications to technical requirements, it identifies technological gaps in specific use cases. It also surveys current research, highlighting strengths, limitations, and potential directions while emphasizing key challenges for future progress.