The article summarizes Gates's response pretty well:
“You want to have something you do with the keyboard that is signaling to a very low level of the software — actually hard-coded in the hardware — that it really is bringing in the operating system you expect, instead of just a funny piece of software that puts up a screen that looks like a log-in screen, and then it listens to your password and then it’s able to do that,” Gates said.
The Microsoft co-founder said that there was an option to make a single button for such a command, but the IBM keyboard designer didn’t want to give Microsoft a single button. So Microsoft decided to use “Ctrl+Alt+Del” as a way to log into Windows.
“It was a mistake,” Gates said, drawing a big laugh from the crowd.
While this was certainly a laugh line, it's interesting to comment on the origins of ctrl-alt-del. It actually originated in the early MS-DOS days. The core of MS-DOS could receive "interrupts" from the hardware to capture certain events. One important event was the ctrl-alt-del key combination; if you pressed these keys at the same time, MS-DOS would immediately reboot. Microsoft included this as a way to recover the system if MS-DOS "hung" and stopped responding to the user.
When Microsoft later introduced Windows NT (a completely redesigned operating system that imitated the then-familiar look of Windows 3.1, where Windows 3.1 still ran on MS-DOS) Microsoft was concerned that "bad guys" would create a screen that mimicked the Windows NT login screen, to capture people's usernames and passwords. This would be bad news in a corporate environment, for example.
So Microsoft had users initiate the login function by pressing the ctrl-alt-del key combination. If you were running a fake screen (probably running on MS-DOS) meant to capture your password, the system would immediately reboot. But not Windows NT. That way, you knew you were always using Windows NT.
While this may not be a very visible usability issue, it's worth reflecting that the ctrl-alt-del key combination has stuck with us today. A "hack" originally introduced in MS-DOS remains as a vestige in today's Windows operating system. The "three finger salute" (as ctrl-alt-del is sometimes affectionately known) has a certain persistence.