Arginine is an amino acid, one of the building blocks of protein. A new study funded by the American Heart Association showed how arginine caused the body to send proteins towards muscle growth, and away from fat storage. http://www.sciencedaily.com/releases/2009/02/090204161848.htm
Your body also uses arginine to make nitric oxide, the chemical responsible for blood dilation. Benefit for the arteries, and you can kind of think of it as natural viagra.
Arginine supplementation also causes growth hormone release. Growth hormone steadily declines as people age. Higher levels of growth hormone correlate with less body fat, more muscle, and even better skin elasticity.
I often supplement with an arginine formulation before going to bed, because the body pulses a larger amount of growth hormone when you sleep. And, well, you know...