Roger, to pick the Transformers 2 equivalent of video games and say video games can't be art is like to say movies can't be art never having seen a non-hollywood formula movie.
I'm as big a fan of movies as anyone. My library probably has at least 2 or 3 thousand movies, more than half of them foreign and with the full spectrum of bad enough to be good and good enough to be moving.
As critical and ecclectic as I am of movies, I'm likewise a fan of video games that are art.
I can off the top of my head pick three video games that are definitely art--unless someone wants to say movies can't be art either.
1. The Path (by Tale of Tales).
http://tale-of-tales.com/ThePath/
There's no fighting in this game. There's no plot. There are several sisters of varying age, and you navigate them through the woods to grandmother's house. Each has several encounters and their own variation of a wolf.
People who think the 2001 remake of the planet of the apes is art would not like The Path video game, but people who like good poetry or werner herzog and slow paced movies almost certainly would.
2. Fallout 3. I won't bother linking it because this one was role playing game of the year not long ago, but this is the first movie I played that forced me to admit it was an interactive movie of high quality writing and acting.
For instance, there's a "scene" (though truly interactive) where I fought myself through Washington D.C. to a Ghoul City and came upon a bartender and asked her story of her. Ghouls were people who were human before the war but didn't die from the radiation and now, two hundred years later, are still alive.
Audrey Wasilewski played a ghoul who was a young kid when the war started, and she told a story that kept me revitted by her tale and how passionately she told it. Rarely in any movie have I heard a story told so well. Maybe the old man in apocalypto, or maybe the guy who played Bhisma in Peter Brook's Mahabharata, but here was Audrey in the role of a ghoul telling a story that could have been a survivor of Hiroshima two hundred years later talking about what happened. And that's just one example from that game. There were many other great actors in it.
3. Grand Theft Auto IV. This is the holy cow of interactive movies. The story, the acting and the open endedness amazes me even two years after having played it. Heck I just logged off playing an add-on module to it a few minutes ago. This "game" is probably better than more than 90% of the movies I consider watchable.
I don't really think whether someone thinks games are art has to do with being the eye of the beholder. I think it has to do with exposure and education. It's easy to grow up watching TV that's all Dukes of Hazard and Three's Company and think there's no TV that's art. But after someone sees Deadwood there's no going back to thinking TV cannot be art.
And games are the same. Are they getting better all the time? Sure, the same way special effects in movies get better all the time. But the best games are made amazing not by computer power. They're made amazing by the story telling and the human acting.
Video games are the movies of the future. Sometimes they're the movies of today.