Are games now, or will they ever be an art form? The main obstacle to being counted as art is great writing, and there is not an established tradition of great writing in any game genre. Maybe adventure games, such as The Secret of Monkey Island, the Infocom text adventures, and the Sam & Max adventures at least got the humor side of things nailed down, and Grim Fandango is one of the very few examples of great writing in a video game I can come up with. Still, among the increasingly small percentage of the population who don't play video games, they appear more juvenile, violent, and stupid than other art mediums, partially because they are.
When we talk about games as an entertainment medium, we always have to compare them to movies. It's the closest analogue, and yet it's not really a close fit at all. I remember hearing someone say that games must be behind on becoming an art form, because Birth of a Nation came only about 25 years after the first film, and here we are after 38-62 years (depending on what you count as the first video game) of electronic gaming and we apparently haven't got anything that matches the D.W. Griffith film. One major problem with that argument, in my view, is that games are not as well suited for important narratives as films. To be successful, games just have to be fun. There have been countless video game versions of Checkers, for instance, which even among board games completely lacks flavor and art. Games are much different from films in that they do not naturally have to have any art to them at all to be successful. The Killzone 2 writers can easily get by with their insane experimentation with game dialogue made entirely out of curse words, and not even the reviewers will bat an eye.
Games don't have great writing because they don't have to. In my previous example of adventure games, we do have some games with great writing, from The Hitchhiker's Guide to the Galaxy text adventure to Syberia. Why just adventure games? It's like natural selection, or, well, economics. Adventure games need good storylines to be successful, as most of the other game genres don't. An adventure game without a storyline or at least some genre flavor would be a mostly uninteresting series of odd puzzles, and not a successful product. Grim Fandango is over $60 on Amazon because it would be entertaining even if you sat a walkthrough on your lap and sped through the puzzles, simply talked to people and watched cutscenes. Comedy writing is especially strong in adventure games, and I think that's probably the first step of great writing. If we can get enough funny games, then maybe we can make our way to artistic games.
One odd quirk of the gaming industry: Reviewers and opinion-makers in the gaming industry don't care about writing, except for when the games attempt to have good writing. For instance, Metal Gear Solid 4 actually tried to tell a good story, and almost all of the criticism directed towards it was based on writing. Players either said the cutscenes were too long, or the writing was based too much on "information dumps" and unnatural-feeling story development. Both of those are writing problems. Now, talk to anybody about Gears of War 2, and you will almost certainly not hear any complaints based on its writing, even though it is appalling. If you don't give credit to Metal Gear Solid for the mostly successful attempt, then why should they try? If they didn't try, then no one would say anything about the writing one way or another, and they'd be just as well off with less money and effort spent.
Back to comedy, where game writing is the most advanced, I foresee there being three legitimately funny games this year: Brutal Legend, Sam & Max Season Three, and the much lesser-known Deathspank. What's the problem with that list? Those three games come from the same three designers who worked on The Secret of Monkey Island almost twenty years ago, Tim Schafer, Dave Grossman, and Ron Gilbert, respectively for each of the games. If even now, we're still relying on the same three guys for the games with good writing, that isn't a good sign.
So, what do video games need to do to establish a tradition for writing, and start building towards being widely considered an art form? Clearly, nothing's more important than just making good games, but that is more of an effect than a cause, and it's very nearly bootstrapping. To provide the environment for good games to be made, we need a lot of things. We do need companies like EA and Valve to keep making the risks they have been recently, and trying to produce original IPs that aren't guaranteed blockbuster hits. This at least gets gamers used to buying games that aren't necessarily Madden or Call of Duty. Reviewers need to actually criticize a game if it has an awful story.
Most importantly, people have to buy good games and not buy bad games. Bad games are at thier peak right now, as Wii Play can sell over 10 million in the U.S. by packaging a Wiimote in the box and programming in a crappy version of Ping Pong. Consumers need to shun the bad games and give an impetus for ones with good writing to thrive. If game companies realize that people are going back to buy old adventure games or Beyond Good & Evil or something, then maybe that can make a difference. But besides all that, gaming probably just needs time. As gamers get older, new generations come up, and the demand will be there, hopefully.