For those who haven't heard of this before, Project Ara is an R&D project for a modular cell phone.
What this means is that instead of getting one large "brick" with all the features, you get an "endoskeleton" frame into which you can attach various modules. For example, a screen (clearly necessary to have one of these), battery, camera, speaker, microphone, processor, memory, NFC transceiver, cellular transceiver, Wi-Fi, etc.
You can mix and match the modules, installing the features you need/want, and omitting the others. As new features are invented (e.g. higher resolution screen, faster processor, better camera, etc.) you can just swap out the module you want to upgrade and leave the rest of your phone untouched. Want a larger or smaller phone? Just get a different size endoskeleton and move your exist modules into it. Obviously, moving to a smaller endoskeleton will probably mean you can't move them all, but you can carry them with you and swap them when needed, if you like.
The official project web site is, unfortunately, pretty devoid of content meaningful to those of us who don't plan to be Ara developers, but there are other more interesting articles, including the The Verge article from a year ago linked above, which includes some photos and a video.
Where are they now? A C|Net article from February has some more recent information. According to it, Google has a prototype and has developed 8 modules for it. They are expecting to start testing it in Puerto Rico later this year.
But wait, there's more. What if you like your phone and just want to add some modules to it? A Kickstarter project (unrelated to project Ara) promises to offer just that. The nexpaq is a USB-attached case (for an iPhone 6, Samsung Galaxy S5 or Galaxy S6 Edge right now) that has slots for six modules. They have developed 11 modules (plus a dummy module to fill unused slots), including an extra battery, amplified speaker, flashlight, breathalyzer, SD card reader and laser pointer. They are also offering a "batpaq" which, instead of being a case, puts these module slots in an external battery pack that should be able to mate with any smartphone, via a USB cable.
The nexpaq team has developed prototypes and is using Kickstarter funding do go to production. They have received more than 4x their funding goal and almost 2x their stretch-goal target. (If you want to pledge, you can do so until May 30th, 2015.) Their timeline says they expect to ship developer kits in August, beta products in November, and release in January.
The future of smart phones is going to be getting very interesting very soon, I think.