Hard to say where/who started it all. Some credit The Doors (More Jim Morrison, perhaps) with creating art rock. 70's - 80's is really where it had it's time (Pink Floyd, Janes Addiction, etc.). It's starting to make a comeback with such great bands as The Mars Volta, Queens of the Stone Age, Kyuss, Tool, The Locusts, A Perfect Cricle, etc. Art Rock is basically intelligent lyrics (sometimes random nonsense that make sense only to the person who wrote them) with mellow or sometimes fast paced guitars. Great genre.
The Mars Volta is my favorite Art Rock band. A Perfect Circle, Tool, and The Locusts come close though.