https://www.youtube.com/watch?v=C5IVj_x6UUQ
Does anyone know if this can be done with sonar x3??? this is amazing!
i want to do this!!!!!   

I think you might be disappointed at how cleanly you would have to play. Sonar cannot do real time MIDI conversion, but you can do guitar-to-MIDI conversion with Melodyne's audio-to-MIDI functionality. I use it often to play an electric bass part, then turn it into synth bass. You still have to play somewhat cleanly, but it's relatively forgiving. It does not track pitch bend...however I doubt the method in the video does, either.

The Jam Origin MIDI Guitar software is very good for this. You do still have to play quite cleanly, although it does pick up most chords. Where it struggles is recognising octaves and repeated notes, as it's obviously hard to spot where one stops and the next starts.

I have spent a lot of $ chasing this. I bought a Roland GS-20, Fishman TriplePlay, and Jam Origin since 2008 or so. None of these allow anywhere near playing normally. For the money, i would go with Jam Origin. It is only $100 or so (about 25% of the other two). It needs no hardware and does about as good a job as TriplePlay.The latency on any of these is nowhere near ideal.  TriplePlay would probably be better for a live gig. However I would not have the courage to play any of these in a live gig. Try some pinch harmonics or damped overtones. Maybe chords only but forget lead. Even with chords only you will get squeaks and missed notes.
The GS-20, TP and JO all will follow bends if set properly and playing thru the right synth. In fact I have a hard time NOT bending while playing a woodwind or piano patch. You get an arpeggio sort of thing.
For recording, your money is probably better spent upgrading Melodyne to Editor. I do not play live so I always record a dry guitar track split from my tube pre-amp which can be easily converted to MIDI via Melodyne.
Melodyne performs maybe a little better than Jam Origin does, just not in real time.
Regardless of what you use, you will have to edit the resulting MIDI track.
I do not think it will ever be possible to get decent MIDI from guitar without a specially built guitar or modifying your playing drastically. Not from the guitar audio alone anyway.
 

Be advised that Melodyne Editor does not provide pitch bend information in an audio-to-MIDI conversion. Do not upgrade to Editor expecting to see this functionality.
 
Edit: My phone never catches grammar errors for me!

I own a GR 50, I think I bought it in around 1987? ANyhow, I have played with the newer floor pedal model and as far as tracking goes nothing has gotten much better since 1987. The sounds have improved greatly, but not the tracking. But the tracking can be real fast and I never had a problem.. 
 
I played mine live without any major train wrecks for about 12 years. As said it takes a proper sensitivity set up and playing style. Low notes track slower so leads are actually it's strong point. I would play organ solos, and things like the flute intro to Heard it in a love song. 
Pads and strings under a slow song are awesome. I didn't over do it. If mixed in with the real guitar it certainly gave you a huge pallet of sounds. And the built in tuner was the fastest you'll ever use. 
It was also part of my sounds when I used to play using a sequencer. It has 3 midi channels just for this along with the 12  channels for the strings (2 each) 
People who try them and are disappointed I think have the wrong goals in mind. 
 
The Roland works better than most because it by passed midi. You were playing the sound module directly so that took midi conversion out of the equation. I tried one of those software freebies or a demo,, I forget, but the Roland tracks better for me. I would like one of the Godin Guitars that comes with the built in 13 pin jack .
 
 http://www.godinguitars.com/godinacsrosewoodp.htm
 
 

To answer the original question, yes there are ways to do this with Sonar, with other software products (vsts). Don't know if there is a "free" solution that works (Synodeia is free, does it work?), but there's Jam Origin, Intelliscore Ensemble (convincing video demo on utoob), maybe others, although there's a bunch of discontinued products if you search (looks suspiciously like the developers threw their hands up in the air). As other comments above say, you're likely to be disappointed looking at a software solution. Like cutthroughrecordings says in the video, latency is an issue and no dynamics. You have to play around with eliminating fret noises too. For non-live transcribing, maybe. For live performance? Meh.
 
(Now, this isn't necessarily a Sonar solution, but I've heard that there are some IOS apps that have made significant headway in this area.)
 
One has to figure that after years of trying the software audio-to-midi route, the best solutions are still hardware. Here's an actual quote from an old (2007) harmony central forum post: "Mr. Anderton, i was wondering why you never make a Realtime Guitar to MIDI app/plugin ?" I'm guessing one reason is because it's darn hard! Consider this too, keyboard players are willing to walk away from their beloved baby grands to play midi controller keyboards. Why? Because piano-audio-to-midi (via software) doesn't work well either. That is, it's not just a guitar issue, it's an every-instrument, including voice, issue. Keyboard players just got over it and went with the hardware "work-around" (midi-controller keyboards).
 
I do use a Godin guitar with the built-in midi (13-pin as mentioned above), and I'm pretty happy with it. If I want to transcribe something, I just record at a slower tempo to allow my limited playing skills to be cleaner! But I don't have to slow down much and I can play all six strings at once and they all get put on the Piano Roll (or, ugh, Staff View). I also use the Godin live a lot and I get pretty accurate results even when playing fast and sloppy (my signature style--uh, the sloppy, not the fast). Actually, for some live work I have the guitar controlling a soft synth in Sonar AND also, in parallel, a computer doing real-time animation (www.voxspectra.com if you are curious what it looks/sounds like). In that live situation, there is so much to worry about, a few fluffed notes are way low on my list!

My favorite (and most accurate) option is still the YouRock guitar. Go ahead and laugh, it looks like a game controller, but although it's not a guitar it lets you play synths with guitar gestures.

I've used JAM Origin with Finale to write music notation. Latency is not a problem as long as you turn off Finale's sounds. You're playing guitar, so you don't need more sounds since you can already hear what you're playing. It works very well for me. I suspect the latency issues deal with sound generation and not MIDI detection.

If you laughed at Craig's last post you may at least get a chuckle out of this - from my experience the best Guitar-to-MIDI converter is the Yamaha G10. Too bad I absolutely hate playing it<G>!
 
I have tried many different solutions, and still own a couple of IVL Pitchrider 7000 Mk2's and the G10. (complete candor mode - I also still have an Avatar, Spectre, GR-300 and GR-700, so I need help!) The G10 tracks so well, it really is too bad they had to go to such great lengths to get it to work, because it really is an awful beast to play.
 
Right now, if I want to transcribe I use the Yamaha, if I want to play I use the IVL Pitchrider, with a twist, I use an older 24 pin style guitar and use the GR300 as a preamplifier/signal conditioner of sorts. I pick up each string's signal at the output of the GR-300 compressor and feed that to the Pitchrider. It works well... or at least well enough.

I've tried probably all the Roland offerings, the current crop works really well if you are driving the built-in sounds, but is really no better than the Pitchrider if you want to drive other synthesizers. The Axon is probably a little bit better, but I didn't think it was better enough (at the time - these things are always changing) to justify a purchase. Hmm... I haven't tried the Fishman - probably won't though, I've become a tad jaded...

The Jam Origin software works a lot better than it has any right to. But it too has not impressed me to the point where I'm ready to make the purchase. And realistically, I think that's where the next major leap will happen - a software solution that doesn't require a hex pickup. Once upon a time such a thing was unthinkable, but with all the horsepower available today, and the advances in digital signal processing I think this will happen. It might even be the folks at Jam Origin.
 
So that's where I think we sit, with respect to using guitars as MIDI input devices. There are a lot of good solutions, with not a lot of difference (from my experience). There are a couple of solutions that do a fantastic job, but they suffer from insanely high prices (think Ztar) or insane implementations (think G10).