A character arc is the line of internal change running under the plot: a character begins believing or wanting one thing and, through the pressure of the story, ends somewhere different (or fails to, in a negative arc). The plot is what happens; the arc is who it happens to and how it changes them.
Arc and plot reinforce each other when the external climax forces the internal choice — the character can only win (or lose) by confronting their flaw.
Example
A man who believes he must control everyone he loves learns, too late or just in time, to let go.