the art of physics
As used in acedemia and engineering, "physics" denotes the study of how the real world behaves on fundamental levels (i.e., on levels lower than those of chemistry and other combinatorially complex sciences).
As used in game design, the word "physics" denotes the behavior of the game world, however distant this behavior may be from real-world physics. Normally the term is used to describe "simulationist" games, where the game is attempting to represent something like the real world, but nevertheless quite distant from the real world. Thus, when we speak of "the game's physics," we're talking about how the game behaves, and not the real-world scenario which the game resembles. However, sometimes people complain about a game's physics, meaning that the physics aren't sufficiently realistic.
So for example, when someone says, "Freelancer's physics are crap." This can mean one of two very different things.
It can mean, on the one hand, that the internal world-model has some problem (and this quite apart from the fact that this model behaves quite differently from real-world physics). Frequently this means there's an internal or aesthetic inconsistency.
It can mean, on the other hand, that the fictional world isn't sufficiently realistic. Personally I don't have a lot of patience for this view. I think if somebody wants realistic science fiction, they should remove the 'fiction' entirely, and limit themselves to a study of physics.
(Of course it doesn't really matter how you use your terms. I just mention their proper use because the greater part of any argument is generally the confusion of terms.)