Character arc is the character’s status as he or she goes through the story, in a process of some kind of change or transformation. If a character is the same at the end of the story as at the beginning, there isn’t really any story. And actually, the plot and the characters are dependant on each other; one develops because of the other. So if your character hasn’t developed much or at all by the words ‘The End’ that’s a bad sign. You have no story. I don’t know what you call all those words between ‘Once upon a time’ and ‘the end’ but it’s not a story.
However, it’s important to note that a character shouldn’t change suddenly and drastically without anything in the story to explain why they have changed. Write a plot that will demand and nurture change and growth in your character; have that be a major focus of your plot coursing. Without it, a plot is nothing. There’s always a bigger game going on outside of your character’s little lives, but that doesn’t mean you can ignore their little lives for the sake of the bigger picture. A tale is empty that way. And besides, little lives are far more interesting, to you and the reader. Not that you should lose sight of the big picture or not try to impress it upon your reader; I’ve talked before about the importance of a complex, realistic world in the background for your story. But ultimately it’s the small story that you focus on.
So, in conclusion, when planning your plot, which I will talk about in detail later, you should be thinking, “How does my character start off and what will I do in the story to have them be _____?” Or, “How do they start off and what will the story change them into?” And be sure to keep a tab on ‘character arc’ while your writing. This can actually help you figure out what to do with the next chapter. “Where do I need to take the character now and how am I going to do that?” usually cures chapter block.