In exploring what has been done in physical computing and art with Arduino components, I found many interesting and inspiring works. Here are my favorites:

 I really like this because I like the idea of homemade arcade or casino games excites me. I like the idea of    being able to create something that is usually sought out in a very specific and somewhat exclusive environment and being able to infuse that creation with your own personal creativity. This is right up my alley
http://vimeo.com/groups/arduinoart/videos/29833767

I love dance, and with this piece I love the idea of making your own music as you dance. Normally, dancing is molded to fit and express the music, but in this scenario the dancer can control and inspire the music. Great concept!

http://vimeo.com/groups/arduinoart/videos/28651568

Daniel Rozin's Mechanical Mirror series is probably the strongest piece that I have come across in terms of artistic expression. He uses a camera and many different everyday materials such as wood or even trash as pixels to reflect viewers' images back at themselves creating a psuedo mirror. These pieces make me very thoughtful about the role of pixels and computers in modern society and a loss of physicality in favor of virtuality. The message of the pieces comes across very clearly.
http://www.smoothware.com/danny/

In these two, the creativity and whimsy is superb. I think that they are really fun and definitely get me to start thinking outside of the box. I mostly like the idea of creating an object that defies social norms since I tend to be pretty defiant of these myself on a daily basis. It makes me think about making an actual gadget that serves a purpose with maybe a somewhat futuristic flare. 

http://vimeo.com/groups/arduinoart/videos/8023595

Similarly whimsical, there is something that just feel very lifelike and organic about this one that I think really just makes people fall in love with it. It is not a living creature, but the way it reacts to the user makes one feel as if it has a personality and seems to draw people to it.

http://vimeo.com/groups/arduinoart/videos/28981808

Also I have to add this as a bonus because as I said I love dance. I think this is just insanely creative and I am kind of obsessed with it though I do not actually know how these suits were made or controlled. I think this concept could even be explored further :

http://www.youtube.com/watch?v=LDME9gbHF10