Linux allows for game development just as well (or maybe even better) as Windows. It’s merely a matter of popularity… And yes, that indeed makes the issue somewhat recursive: Windows being the primary gamedev target is strongly perpetuated by developers choosing it as a development target.
Originally, releasing high-end games on Linux was prerogative of porting enthusiasts (i.e. Loki Games, who ported HoMM 3, Heretic 2, Rune, Quake 3, Unreal Tournament…) and indie developers who actually got a big chung of sales merely for supporting Mac & Linux (e.g. Woflire Games, who released Lugaru on multiple platforms at the same time).
More recently, native Linux support was expanded by the gradual move of most engines to multiplatform support (like Ren’Py, where Linux support is usually just a matter of enabling a checkbox in the SDK), and some really big companies advocating multiplatform support for sake of even further increase of their incomes (most notably Valve, who ported their Source engine to Linux years ago, and even made an effort to make their own Wine wrapper recently… speaking of which, a Wine bottle is also a way some companies made low-effort “Linux port” releases).
Ultimately, lack of native ports for a large amount of software and videogames is probably the most influential factor in the slow grow of Linux popularity… And the reason for this lack of native ports is indeed the low popularity of Linux. However, the situation with games at least appears to improve with time (not to mention native releases and Wine support, some multiplatform engines actually allow for drop-in support of Linux binaries even if developers did not bother making a Linux release), and I’m hoping that regular releases of new Wine versions mean that the amount of Windows games and apps usable in Linux will continue to grow at a steady pace.