It was. At peak perhaps 10 years ago. It is telling that the game engine citation in that article is from 2009.
Now the ecosystem of game engines is very different. Very few games are written in raw C/++ and have to have their own tiny scripting language packaged. They are mostly based on more established engines. 'Small studios' have gone, niched out of end-to-end dev, or re-invented as the 'indie game' world, and pretty much none have their own multi-game engine.
In fact, I've only come across Lua used in Pico-8 gamejam games in the last 2 yrs, personally. (Though I'm retired now.)
It was a phenomenal language for gamedev. I commissioned a Lua consultant to extend the language in a small way for a game, I ended up paying for about half the hours I expected.