There is only a select number of All-Star spots. True, MLB seems to keep adding more every year, but it's still a relatively small number compared to how many players are in the MLB.
Once you take out the perennial All-Stars, such as CC Sabathia, Justin Verlander, Evan Longoria and Albert Pujols, you're left with a bunch of guys who either had a good first half and deserve to be All-Stars, or a first half good enough to be considered and thrown in.
Phil Hughes definitely doesn't fit into the latter category. Just look at all of the other pitchers in the league. Outside of the aces, how many of them are as good or better than Hughes and have a good enough team to back them?
Looking at the AL East alone, Jon Lester or Josh Beckett will likely be an All-Star, maybe even both.
Then there's David Price of the Tampa Bay Rays, who will likely follow James Shields to the All-Star Game. Ricky Romero is the Toronto Blue Jays' ace and will be an All-Star barring any drastic setbacks.
Other than those guys, there are not many pitchers in the New York Yankees' division to challenge Hughes for a spot on the AL All-Star roster. Even position players, outside of the elites, won't really be a threat to Hughes' spot as long as he can continue to pitch well.
Hughes doesn't belong in the top tier of pitchers, but he's making a strong case to join the second tier.
Once the top-tier pitchers and position players are in (and there aren't many of them), those in the second tier will fill up the rest of the spots.