Well, it's up to what you prefer really, but software really has the advantage of being cheaper and much, much more flexible than hardware recording.
I suggest watching Dave's vid on starting a studio. An absolute minimum i'd say for production is a decent computer, a soundcard and some monitors (although i've seen people pull off headphone producing very well). And of course a piece of software. (Reason, Reaper, Ableton, ProTools, Cubase, Logic, Nuendo, Sonar, FL Studio, ...)
If you wanna go hardware, you will need a lot of hardware synths, a mixing desk, a 16 track recorder, some outboard FX. That will cost you a few thousand bucks. The best way i've found, is just using software with a lot of MIDI pianos and controllers. And you can always choose to hook some synths up to it too.