Many people (gamers, mostly), including Jerry Holkins and Mike Krahulik, Shamus Young, a game designer named Kellee Santiago, and an author named Robert Brockway have taken him to task.
My take on it:
Can images be art?
Yes, images can be art.
Can music be art?
Yes, music can be art.
Can story be art?
Yes, story can be art.
Can acting be art?
Yes, acting can be art.
Can sculpture be art?
Yes, sculpture can be art.
Can the combination of all of these be art?
Yes, the combination of all of these can be art.
So then, on what grounds can one state that the combination of all of these, with the inclusion of interactivity is not and can never be art?
Basically, if A is art and B is art and C is art and D is art and E is art and the combination A + B + C + D + E is art, how can A + B + C + D + E + F not ever be art?
Also, what do you mean by "art"?
* * *
Since it seems to be popular these days, a brief list of games I think are art:
1) Grim Fandango
2) Braid
3) Half-Life 2
Why do I think these are art? To answer Roger Ebert, all three caused me to be "more complex, thoughtful, insightful, witty, empathetic, intelligent, or philosophical."