It's "Gameworks" now more than just Physx. Here's the basics. Developers don't want to spend the time and money to create their own visual effects, like realistic cloth, smoke, hair, particle explosions, etc. Nvidia's right there to offer a set a tools they can "drop in" and get those things. Thing is, some developers are better or worse than others at using and implementing these tools. Its one of those things that helps get games out quicker and inexpensively.
Its also advantageous to Nvidia. The source code availability is negotiated on a case by case basis with the developer. AMD relies on source code optimization for the best performance at launch and beyond. This is where the advantage comes in. AMD can't always get the full access they would like. Nvidia tends to lean more on driver optimization for their gains.
At the end of the day, I see Nvidia as doing more for the developers and their bottom lines, that allow more time, effort, and money into the things that really matter to the game. I see AMD as the hardware vendor with a "me too" product, doing far less for the community as a whole from the initial creation of IP to the end, released product.
I support Nvidia because they support developers. I mean seriously, coding smoke, accurate shadows and other nonsense seems pretty mundane. They should be coding cool stuff.