The new Arena system explained
One of the many changes that came along with Patch 3.0.8 was a new and nebulous Arena matchmaking and rating system that nobody was aware of except, perhaps, the guys over at Blizzard. When the new system debuted, it was met with mixed reactions and Blizzard was forced to suspend Arena play for a few days while they straightened out the kinks. The system was back a few days later, with ratings rolled back to pre-maintenance numbers and Achievements reset. Some players report being able to keep the items bought during that period, despite Blizzard stating that these would be removed and Arena points refunded.
Blizzard poster Aratil dropped by the PvP forums earlier to explain -- in layman's terms -- the new Arena system. The new system is supposed to match players according to skill, rather than gear. Exactly how the system determines skill wasn't made clear, although Kalgan explained that the system uses a Gaussian Density Filter. New to the system is a 'hidden rating' that's different from either the personal or team rating, and is unique to the player regardless of how many Arena teams he or she plays with.
What's clear from Aratil's post is that the change was intended to "promote the enjoyment of Arenas". Under the new system, highly skilled players will be matched up against other teams that provide a challenge while newer players just starting Arenas won't feel shut out. In a way, this can be likened to the low barrier of entry for raiding in Wrath of the Lich King. They're still tweaking the system, specially as far as ratings losses and gains are concerned, but the overall goal is to make Arenas more fun. I think we can all agree that more fun is always good. As long as it's working as intended, that is.
