From Despicable Me - Creating The Minions:
The [directors] subsequently designed a language for Gru’s army that is intended to be an indescribable vocal expression
"The language is much more about sound than it is about any kind of meaning," says [producer] Christopher Meledandri.
Here you can watch a short featurette where producer John Cohen explains:
The voices of the minions are actually done by Pierre Coffin and Chris Renaud, the directors of the movie.
And what they have done is ... created this incredibly unique language. A lot of times it sounds like it’s gibberish, a lot of times you hear a little bit of french. You hear all kinds of languages being incorporated into the way they speak.
And then occasionally, you hear a word or two of English, or that sounds like English, that gives you a sense of what the minions are actually saying.