Now on one hand, I conceptually believe that business owners should be free to do business with whomever they like. However, the concept part of that just doesn't work in the real world. Why? Because the moment you allow someone to say "I don't like them folks, therefore I can treat them differently" to one group, you basically open it up to any and every group that is different than the business owner.
For example, a baker who believes strongly that black folks are cursed by God doesn't want to serve any African-American customers. Would that be okay under Arizona's pending law? It certainly opens the door to it being acceptable. Mind you, the scenario I just presented isn't science fiction, as there are such groups in existence right now (see HERE for an example). What's more, the whole pending Arizona law makes it every more wretched, as the business owner may not even have a way to knowing whether a customer is gay. It's as if the customers will have to provide papers documenting their sexuality before someone will do business with them.
Now what about religious liberty? Hey, I'm all for that; worship how and what you want, as long as it doesn't interfere with anyone else. If you make the choice to believe one part of the Christian Bible (the whole "men don't lie down with men" part) but then choose to ignore other parts of the Christian Bible (pick'm: don't eat pork, don't eat shellfish, you can kill your wife if you find out she wasn't a virgin when you got married, tax collectors are evil, it's virtually impossible for rich folks to go to heaven, you can own slaves...and the list goes on and on and on) then that's your business. It becomes society's business though when those beliefs interfere with the lives of others.
In the end, American society isn't predicated on a specific belief system. If it was, and that belief system was that of Fundamentalist Christianity, then the name "Jesus Christ" would be mentioned at least once in our founding documents. But the problem is that said name isn't. American society is, instead, predicated on the notion that everyone should be given a shot in life to enjoy life, liberty and the pursuit of happiness. Our founding fathers noted that those rights come from the "Creator", and as a result were not subject to subjugation by man (not even the state government of Arizona). Period. No one doing business in the public square of America should have the right to say "my rights are better than yours".
Here's to hoping that Arizona's governor vetoes this ill conceived justification for discrimination.
I'll end this by posting something that George Takei wrote on this topic. You can link directly to it HERE.