The ARITHABORT flag will explicitly add SET ARITHABORT ON/OFF; statements in the query, if it's set to true. It's a way to switch it ON for a DML query when it's set to OFF by default in SQL Server.
It can be switched on by default in SQL Server: In SSMS, right-click the database after connecting -> properties -> Connections -> Check Arithmetic Abort.
This will make sure the setting is always on, if you want to.
But I'd recommend reading this: http://www.sommarskog.se/query-plan-mysteries.html to get to the bottom of this setting.
I checked the comment line on ArithAbort, and it's the same since 2004, the one in v4's code. From v2.5's DQE:
/// Flag to signal the DQE to generate SET ARITHABORT ON statements prior to INSERT, DELETE and UPDATE Queries.
It's never used in SELECT queries. The setting was added to make sure inserts / updates in tables which were used in indexed views succeeded without errors. Microsoft suggests with SQL Server 2012 to enable Arithmetic Abort on logon, so this setting isn't useful in newer sql server versions: http://msdn.microsoft.com/en-us/library/ms190306.aspx