Well, I can take a swing at it; sorry for the length, but this is a complex question, and short answers really don't address the important points.
First, I suppose we should clarify some terms. The definition of "art" depends, of course, on your frame of reference. Are you speaking of the techniques, the technical virtuosity involved? Are you speaking of (as HareBrain and Peter have mentioned) the "arts and crafts" idea -- where the two are, though not synonymous, more closely related than is generally the case? Or are you speaking of the artist's vision and the conveyance of that vision to others?
From my understanding, the critical definition of "art" tends to be closer to the latter, though the others all play their part in the final product. In other words, art is the honest approximation of the artist's unique vision of the world using the most precise, informative means that person is capable of to convey that vision to others. This does not reduce us to "realism", as the vision does not depend entirely on objective reality, but rather on a combination of this and the human responses to whatever phenomena chosen as the basis for a particular piece of art, which can also include dreams, visions, hallucinations, phantasmagoria of different sorts, hopes, longings, and both cultural and private mythologies -- and, to quote Lovecraft, these emotions "must be handled with unsparing
realism (not catch-penny
romanticism)", in order to be such a genuine, honest expression of the human condition. It does, however, require
verisimilitude, which many people
read "realism". They are not, obviously, the same.
Also, there is a distinct difference between
art, in the critical sense of the term, and material whose primary focus is to
entertain (what Lovecraft, again, would called "entertainment enterprises"). Both are worthy enough endeavors, but the purpose of the latter is more often than not limited to this (as well as to making money -- a false premise of itself, generally, as writing is one of the most
unlikely ways to make money that can be found), whereas the purposes of art are both to entertain, to enlighten, to provide a genuine avenue of self-expression for the artist, and to honestly address some aspect of the human experience. The one is "reading matter", essentially used to kill time or avoid boredom; the latter enriches one's experience and understanding of life and of oneself.
Yes, there are subjective levels to deciding what is "art" and what is not, but most of the "rules" governing what is quality or not are things which have been evolved over a very long period of time, based on a gradual growth of knowledge of what actually works best at communicating these visions to others, and what continues to serve this function over an increasing period. No work of art is high quality throughout; there will be rough patches and fumbles by even the greatest (Homer, Shakespeare, Marlowe, Poe, Wharton, etc.); also, no single work of art will "hit the spot" with everyone, as individual readers -- no matter how broad their interests or perspective -- also have their blind spots, prejudices, pet peeves, and "soft spots" or sentimentalities. Nonetheless, these criteria are fairly objective, as they are based on what has succeeded best throughout history, and what remains viable (and vital, in the sense of "alive", "vibrant") years, decades, centuries, even millennia, after it was originally proffered to the world. Were the reverse true, and it was entirely subjective, then
no critic could ever find value -- let alone high value -- in a piece which was not to their own liking; something which is manifestly
not the case.
Of course, in order to do so (as HareBrain has pointed out), a wider and deeper exposure to literature (or other types of art) is required, as well as an ability to
read critically -- something few lay people do. By and large, even heavy readers are
lazy readers; they do not hone their judgment but are content to put forth as little effort as possible and wish to be (as you point out) entertained. But what entertains today is likely to bore tomorrow... and is almost certain to do so in a century or more... unless the writer concerned has put forth the effort to achieve a great deal more than
merely entertain. Edmund Burke addressed this question very well in his essay "On Taste", often included as a prefatory essay to his work
A Philosophical Inquiry into the Origin of Our Ideas of the Sublime and Beautiful -- two works I highly recommend to anyone wishing to genuinely think about such issues.
Lovecraft was also one who thought deeply about such matters, and you can find numerous passages in his letters (as well as some of his essays) on the subject; some of the most enlightening are those to Zealia Brown Reed (Bishop) and Woodburn Harris -- of the former, I would recommend, for shorter discussions,
Selected Letters II, pp. 141-46, and 297-302. There is also this, from a letter to Elizabeth Toldridge:
False or insincere amusement is the sort of activity which does not meet the real psychological demands of the hunan glandular-nervous system, but merely affects to do so. Real amusement is the sort which is based on a knowledge of real needs, and which therefore hits the spot. This latter kind of amusement is what art is -- and there is nothin[g] more important in the universe.
-- SLIII.21
A few excerpts from his letter to Harris may clarify things a bit here, too:
I'd say that good art means the ability of any one man to pin down in some permanent and intelligible medium a sort of idea of what he sees in Nature that nobody else sees. In other words, to make the other fellow grasp, through skilled selective care in interpretive reproduction or symbolism, some inkling of what only the artist himself could possibly see in the actual objective scene itself.... The picture can, if it be good art, give you something in the real scene which you couldn't have gathered for yourself -- which only the particular artist who painted the picture coul ever have gathered and preserved for other people to see. Of course, therer is just the same inevitable diversity of vision when we look at a work of art -- i.e., no two spectators see quite the same thing. But in this case the artist, through his knowledge of the difference between his especial vision and the average of mass vision, (as tested by a comparison of many artists' results) has been able to supply guideposts to a very great extent; so that we cannot fail to recognise his emphasis on those features of the scene which he alone has beheld in the proportions represented. That is what self-expression is, and self-expression is art. A man is a true artist according to his ability to make other people see the visible or emotional or imaginative world as he sees it, without departing from the true basic outlines of the world he is delineating.[...] [The pleasurable effect of art on the viewer is that], for one thing, the sight of the other man's vision, with its emphasis on the personally selective element, tends to bring out his own subconscious memories of kindred aspects of vision -- that is to drag up to consciousness impressions received and retained in the subconscious, but never before realised. This means the discovery of something new and unexpected in oneself[....] Yet because it was never before consciously registered, it has all the striking fascination of absolute newness as well. The work of art has enlarged our supply of conscious memory-wealth -- has shewn us to be richer than we thought we were It has, in all truth, enriched and developed us. This enrichment is permanent, because the raising to consciousness of a new type of vision enables the spectator to exercise this new type in his subsequent contacts with Nature. We see and feel more in Nature from having assimilated works of authentic art.[...] Besides the joy of discovering untapped wells in ourselves, there is the joy of capturing another's vision -- the sense of expansion and adventure inherent in viewing Nature through a larger proportion of the total eyes of mankind. We derive from this process a feeling of magnification in the cosmos -- of having approached the universal a trifle more closely[....] Another thing which art does is to intensify and clarify our own personal and conscious reaction toward Nature, by setting our minds definitely into the pattern of creative selection.[...] The constant discovery of different peoples' subjective impressions of things, as contained in genuine art, forms a slow, gradual approach, or faint approximation of an approach, to the mystic substance of absolute reality itself -- the stark, cosmic reality which lurks behind our varying subjective impressions.
(Oh, and Interference might find this bit interesting -- from the same letter: "Art is the gateway of life -- and in the opinion of many, myself included, the only reason that any highly developed man of sense has for remaining alive".)
(continued....)