The Arena
For other uses of the term "Arena", see Arena.
The Arena is an automated fight mode where two groups of non-player combatants can be specified and set against one another. It is available in offline builds: to access it, download and install the latest version of Crawl and select 'The Arena' from the main menu. It can be an entertaining way to get back at that monster that just killed you and ended your game (i.e. pitch The Royal Jelly against 99 pandemonium lords and watch it diiiie...).
Monsters
For information on monsters and their parameters, see the dedicated guide on monster creation: dat/database/help.txt:313 (0.28.0)
There's a lot of room for modification. You could make an orc priest that only uses Smiting, or a bat with the same spells (at the same power!) as an orb of fire. However, there can only be one monster type per team, unless you specify a band or random monster - such as place:(location), which calls for a random from that place.
To create Dowan and Duvessa, you must specify Duvessa band. To create the various Serpent of Hells, you must specify arena_place:(location) at the start of the line, where location equals Geh, Coc, Dis, or Tar - otherwise it defaults to the fire version.
Arena Parameters
For information of arena parameters, see the arena guide: here, and a list of arena maps: dat/des/builder/arena.des:1 (0.28.0).
Changing the parameters can make the battles go (much) faster, change the terrain of the Arena, or cause an infinitely respawning battle. Note that many of these are case sensitive.