Nvidia spend time and money developing PhysX (It's a SDK so developers don't have to write their own physics and worry about hogging PC resources ) and creating a hardware architecture (CUDA cores) to allow games to run smoothly using physics (CPUs are not very efficient at this because they are not made with the intent of doing large calculations lots of times). This has been round for quite a while just never used. Nvidia bought PhysX from another company though.
So no Nvidia is not the bad guy, they are trying to improve there customers gaming experience. ATI could easily make their own systems however they do not.