There have been a few games where magic and technology could be combined. Not many videogames that I know of, but several tabletops. Deadlands had gunslingers with enchanted bullets and such. The GURPS setting Technomancer was exactly what it sounds like, with Infernal Combustion engines and magic computers. Of course, a lot of the more outre animes follow the idea that machines can be magical as well, if only in de facto.
As to the theory, it can be presented a few different ways, the most obvious being opposed or non-opposed. Arcanum did a pretty good job of explaining the Opposed stance, by pointing out that technology is the precise application of physical laws, while magic is the willful destruction of them. They went a little too far with the idea, but the principle can be said that magic is inherently problematic for machinery at least, because, by definition, it can rewrite the physical principles a machine operates on. Any magic in the presence of a machine would make it break down or behave erratically. Why it didn't also kill living creatures, which are really just fantastically complicated chemical machines, is never addressed by any such gameworld.
On the other hand, if your particular form of magic operates on it's own consistent, repeatable, verifiable principles, then in can become a form of technology all of it's own. In the old days, games referred to this as Thaumatology, the scientific study of magical theory and practice. Provided it doesn't automatically disrupt the natural process of physics, there's no reason magic can't exist along side any other technology.