The story of the volcano is as follows: before 1968, there was no volcano. Whats now a huge mountain of fire was known as Cerro Arenal, or Arenal Mountain. This was because it had never shown any signs of volcanic activity nor any seismic events had occured close to the area. Many towns grew around it and people even climbed to the top of the so called "mountain". On July 29th, the mountain suddenly blew up. A massive, explosive eruption threw tons of rock and ash unto the unsuspecting towns which were completely destroyed and buried. Lots of people died. Fifteen square kilometers were buried and the explosion affected over 232 square kilometers. Since that date, the volcano has been restless, with constant eruptions of both lava and fire and ash and rocks. This eruptions can be safely seen as long as people stay inside the safety perimeter.
Theres a really good youtube video which exemplifies the volcano very well: