According to the event's fact sheet (warning: download link), inductees need to meet two specific criteria before being considered: "[One] The inventor must hold a US patent, and [Two] the invention must have contributed to the welfare of mankind and have promoted the progress of science and the useful arts." The National Selection Committee (representing "various scientific, industry, and professional groups along with a Blue Ribbon Panel of experts") then chooses said inductees.
In his bio, the committee specifically notes Baer's accolades in the game industry, calling him "a pioneer in the field of interactive video games" -- an assessment we tend to agree with. We've already got a suggestion for next year, though, guys: Shinji Mikami. Obviously for bringing the world the "What're ya buyin' / sellin'?" guy in Resident Evil 4, forever changing the way we conduct business. Come on, NSC! Aren't we buddies?