The Shadow Arena is a fighting arena located within the Shadowlands and connected to the Factory, where the Shadow Lord creates his evil creations, by an underground tunnel.
This arena is used by the Shadow Lord to put his prisoners and slaves up against his evil creatures, most the time killing them. They mostly fight against Vraals, the Shadow Lord's personal fighting beast.
The Shadow Arena has columns that circle the inside of it, which is where the audience (mostly Grey Guards and Ols) sits watching the fights.
The Arena is most likely inspired by ancient Roman colosseums.