The Arena of the Ages is a place where you can raise and battle monsters. However you must have made a save to access it. You can go to it at the end of time or at the title screen. You can give items to your monster in training and battle. You don't need the Arena of the Ages to beat the game. It's just a fun way to get items.
Begin by entering the arena. Talk to the stable master. After telling you about the arena, he allows you to choose a smidge for your very first monster. Choose the one you like the most, and the stable master will give it to you and all the others will go.
Training
Training allows your monster to grow stronger and more powerful. Depending on the item you give it, and the time period you select for it, a number of things could happen. Your monster could return with an item, have learned a new tech, or even evolved into a completely different monster.
How to Train
Bring up the monster display screen and select "Train Monster". Then choose an item and a time period and your monster will go to train. Training usually takes about ten minutes and it will not come back unless you are not there (when you enter next time, the stable master will call you over and you can see it return).
Time Periods
Items
Learning new Techs
This is really easy if you have access to Antiquity (12,000 BC).