I thought I'd take some time today to share some of my own views and findings on how to how to run a great arcade with you.

Like most sites there will be three main categories to consider. Content, Traffic and Revenue.

- Content

Buy a good .com domain that is short and easy to remember, fairly different and brandable.
Finding a good domain should take you atleast a few days. Try to get something that has one of the following keywords: games, arcade, online, free.

The arcade script you choose doesn't matter a whole lot. I prefer GSS (gamesitescript) but you may not. Try the demos of a couple and see what you think. Go for something that's simple and clean for users.

Site design is a very overlooked part of building a sucessful arcade. You don't have to go crazy and hire someone to do a $$$ skin for you or anything but you should Never use the default template.
At the very least you should put some effort into a quality header, a brandable logo and change the css that came with the default theme.
Being different is pretty easy when most just use default templates. Take full advantage of this and make your site memorable with a different design.

Games are not a huge concern for most arcades unless you want to develope your own.
You can easily survive with as little as a few hundred but the more the better. You can buy a 2k-3k game pack for pretty cheap so there's no reason why not to.

Forums and other features are an option but not reccomended for all arcades. You need a pretty big returning user base to get forums off the ground and they can take up alot of your time deleting spam and moderating.
Other options like shoutboxes and keeping track of scores are possibilities but again they won't work well on every arcade.

- Traffic

Most people find getting steady traffic pretty difficult. I'll try to cover a few things that I've found work and shoud give you pretty good return for your effort/cost.

Banner exchanges is number one because you should have your banner exchange code up on your site before you do any promoting. Any traffic that comes in before you have all these up will be traffic that could have been multiplied and turned into more traffic.

I would suggest choosing around five arcade banner exchange programs.
There are two main types of exchanges. Click exchanges and Impression exchanges.
The difference if you didn't already know is that click exchanges only give you credits when someone actually clicks on that banner. Your ad will be displayed as much as is necesary until it gets that click back.
Impression exchanges give you credits every time the banner is displayed to a user on your site. Your banner will then be displayed on other exchange members sites as many times.
Some Impression exchange offer bonus impressions for each click on your site or have what's called sliding ratio which will determine what ratio you should get depending on the CTR you are sending the exchange.

It doesn't make a whole lot of difference which you use as long as you've chosen fairly reputable exchange sites.
Do some research on each before you choose and see which will be the most fair.
Bigger is not better in this case. You're looking for quality.

Link exchanges are a very important part of promoting an arcade site.
Link exchanging is free but time consuming and not always that fair.
A tip for making this part easier on your self is to create a notepad document containing a subject, message, your url and your email. Write up a brief message that you can send to any arcade you come accross that you may want to exchange with.
Now go find some arcade topsites and visit every arcade on them. Most arcades will have an automated process for link exchanging. If so then just fill out the form and submit. If they have an email you can still just copy over from the notepad and send it to them.
You should be able to do about one arcade per 1-2 minutes this way.

Adwords can be very expensive and is not reasonable for most arcade sites.
One thing you might want to consider is to run a banner campaign on the content network. You should be able to pay a pretty low CPC (around $0.15) for this type of keywords and you will get good brandability this way. You want people to remember your name so the next time they go to play they type in your name instead of google. If the ad gets seen 10,000 time and gets 10 clicks costing you $1 that a pretty good investment to have your logo seen by 10,000 users.

Direct advertising on related sites can be very expensive and may not give you a good return. If you are going to go this route make sure you have a very good idea of how many visitors you should expect for your money.
Calculate the value to a CPC and see if paying $100 for 500 visitors really makes sense.

- Revenue

Adsense is going to be the widest used program for arcade sites. This may not be your best choice but it's a good place to start.
You can't put game images beside the ads anymore and even recently they have also said no more ads near the actual game on the game page.
I'd suggest trying to find a good placement for a link block ad as you will get the most per click and possibly the highest CTR on this type of ad if you can make good use of it.
Image ads are also okay but have quite low CPC, this is fortunetly offset by a slightly better CTR. Try image ads in a few places and see what happens.

Yahoo Publisher Network (YPN) is the holy grail for arcade sites and can turn that low earning arcade into a real good earner. The problem is that the ads are not very well targeted and if you push alot of traffic you run the risk of getting your account terminated.
I would suggest using it sparringly Only with good geo-targeting and not rely on it to much.

Adbrite is an option but one that I've never had the best luck with. Some will say they have really good results with it and others can't even figure out how to use their fugly site.
It deserves a look either way and a bit of testing will let you find out if it's right for you or not.

Selling links and banner spots can be a good way to monotize your arcade. You'll have to be doing pretty well for traffic for anyone to consider buying unless your prices are really good. Try to think like your buyer and work out the value of what you're selling.
Don't guess how much traffic they'll get from it. If you have to setup a special deal with an arcade or two to test or setup one of your other arcade sites in the placement you're offering for the first month then do that.
Being confident in what you're offering and having some stats to show will get people interested.

I hope you've stayed awake through that and hope you found it useful.

Best of luck with your arcades!!!