The Spanish Village Art Center is tucked away in the northern part of the Pedestrian Mall at Balbo Park -- sort of between the carousel/zoo area and the main drag of museums. Sometimes it can feel a little off the beaten path since the tourists don't seem to amble up there very often.
It is set up as a small "village" of artists and craftspeople, with small studios/ retail shops where you can see the artist(s) at work and perhaps buy some of their art. Most of the art is of the painting, ceramic or glass variety. Funkier, larger types of art like metal sculpture or wood pieces are not really represented here.
I wish that the artists were a little more cutting edge, as most of this is the sort of of the "craftsy" camp (lots of wind chimes, candle holders, mugs, paintings of flowers etc) -- the type that will offend no one. In fact, I am not really sure where exactly the "real" artist studios are in San Diego now that I think about it. Spanish Village and a few galleries here and there might be as close as you can get to it in San Diego.