In this thread, Etsy admin HeyMichelle clarified how the tag “art” should be used:

The Category (first tag) Art is, in general, for items that only function as art. If it fits in another “what it is” type of category (eg. Jewelry, Housewares), your first tag is that category. However, if the term “art” applies to what you are making, you may use “art” as one of your extra tags.

This is how it works for buyers:

If the buyer is looking for an art print, they will search “art print” or “painting print” or something like that.

If they just want to browse through all art, they click the category “Art” (which I find is generally only things that belong in the Art category, with only a few incorrectly tagged items here & there). If they want to narrow it down, they will click one of the subcategories on the side. Now, we are only finding things correctly tagged with Art as the category (and maybe a few rare flagrant mistags, which you send to flagged [!at] etsy.com.

Example: mosaics

If I made a mosaic scuplture piece that has no function other than being art, it’s category is Art. Then I tag it scupture, mosaics, etc.

If I made a mosaic mirror, it’s category is Housewares so it can be with the other mirrors. I also tag it mirror, mosaics, and art, since I feel it is art.