Away from the elegance of Budapest's historic centre, a dingy rock venue has been turned into a geek's paradise. The laptop screens glow in the dim light as fingers flicker quickly over keyboards. Lines of code, incomprehensible to all but the cognoscenti, are typed out.

This is Hacktivity - an annual conference for hackers. They've come in their hundreds from all over eastern Europe and beyond. The organisers have set up two days of workshops, talks, and games so the hackers can hone their skills. In one game, the players have to race to break into a computer application designed to censor websites.

Illegal? Not here. The company that made the technology is actually here to oversee its vandalism. Cisco Systems, McAfee, Symantec ... some of the biggest names in computer security are at Hacktivity to court the hackers. Their branding is all over this event.

Quite why software companies should be flirting with the very people many would consider their enemies is explained to me by the tech security guru, Bruce Schneier. "Hackers are basically security experts" he tells me. "There are a lot of bright people here and the vendors want to be a part of that".

Essentially, the hackers are guys you want on your side if you have anything to do with computers. In the 21st century, with the cyber revolution in full swing, hackers have the knowledge and therefore the power too.

Most of them I spoke to here call themselves 'White Hat' hackers. That means they use their skills to expose flaws in software, and then point the weaknesses out to vendors so they can be fixed. Or, they work with companies strengthening their cyber defences against data theft, fraud, or sabotage.

On the dark side are the 'Black Hat' hackers. Their behaviour can range from the relatively harmless, like leaving mischievous calling cards embedded in networks they've infiltrated, to bringing down the financial and communications systems of whole governments. This actually happened in Estonia in 2007. The attack is believed to have come from Russia.

I ask Alexander Kornbrust, who runs Red Database Security, which side is winning. "They are" he says. "The attackers only have to find one way in, while the defenders have to protect all fronts." Alexander gives a lesson from history. "Even the strongest castle was eventually overrun."

So what does the future hold? Governments are waking up to the idea that hacking is going to play an important role in coming wars. Bruce Schneier says cyber warfare will never replace conventional warfare, a view advanced by the hacker Felix 'FX' Lindner too. But he says a cyber attack to shut down power grids, communications systems, and water supplies could well be used before an army invasion.

After finishing my television report for the channel and sending it back over the internet, I am approached by one of Hacktivity's organisers. He looks concerned. "I think you'd better ask Al Jazeera to put some new passwords in place," he says. "There are a lot of hackers round here."