The Xu’s Modeling Method, originating from foundational research for the HyPneu software at Oklahoma State University in the 1980s, provides an intuitive framework for hydraulic system modeling. Its core premise is to align the modeling process with engineers’ cognitive paradigms. A key breakthrough was its algorithmic solution to Differential-Algebraic Equation (DAE) problems, validated through the PERSIM software developed under China’s “Seventh Five-Year Plan” national project. The method enables model construction directly from hydraulic schematics by applying Kirchhoff’s law at junctions, reducing all components to two fundamental sub-models: hydraulic resistance (throttle) and hydraulic capacitance (cylinder). This yields an implicit state equation (a DAE). The Xu’s Algorithm solves this via a unified dynamic-static simulation approach, using the Newton-Raphson method iteratively to compute static states and dynamic derivatives over time steps. In the Digital Twin era, the method finds new relevance. Its implicit state equation serves as a potential mechanism model for digital twins, contingent on solving the inverse problem—a current research focus that may incorporate Artificial Intelligence. Additionally, the method offers a theoretical basis for creating “Hydraulic Intelligent Components,” guiding the design of simpler, more efficient constructions from first principles. This positions it as an advancement over the classic Hydraulic Resistance Systematic Theory. Practically, the method is being applied to develop dedicated simulation and digital twin software for a hydraulic robot system manufactured in Shenzhen, demonstrating its ongoing industrial applicability.