The Punk Hazard Arc includes the following characters: Straw Hat Pirates, Trafalgar Law, Caesar Clown, Vergo, Monet, Kinemon, Vice Admiral Smoker and the G-5 Marines.
The main reason behind this arc is that the Straw Hats answer a distress call from Punk Hazard, which eventually lands them in the middle of the complicated situation on the island. Punk Hazard is a place of extreme and contrasting environments: half of the island is burning to ashes, half is covered in ice, because of the battle between the Admirals Akainu and Aokiji.
The story of the Punk Hazard Arc unfolds as the Straw Hat Pirates receive an emergency call from Punk Hazard, an island considered off-bounds and uninhabited. On arrival, the crew splits up and heads to either side, where they find that the island they were on is used for a base to perform illegal scientific experiments, under the leadership of Caesar Clown, and a former comrade of Dr. Vegapunk. The arc also introduced the concept of SAD, a chemical compound that is essential to the production of the synthetic Devil Fruits, and also reveals the underground of connection of the broker, Joker, who is later revealed as Donquixote Doflamingo.
While the Straw Hats are, they encounter several detours such as giant children experimented, the deadly gas weapon that Caesar developed, and numerous clashes with the natives of the island. This comes further complicated when Trafalgar Law, a Warlord of the Sea, suggests alliance with Luffy to take one of the Four Emperors down. The alliance becomes a very important issue in this whole arc and will cause the future to change.
The plot deepened following the arrival of Vice Admiral Smoker, along with his downlines from the G-5 Marines, as they began investigating matters within the island. This birthed conflicts between them, the Straw Hats, and Caesar's men. The arc had its peak at the point where various battles were taking place concurrently: Luffy versus Caesar Clown, Law versus Vergo, and other Straw Hat pirates fighting against the team of Caesar's down liners, Monet.
It has themes of scientific ethics, the abuse of power, and the consequences to bear if extreme military actions are taken. New ground is given through the experimented children's plight and the leeway of the history of Punk Hazard being a site for weapons development. The arc also delves into the complex relationships between various factions in the New World, including the Marines, Warlords, and underground organizations.
The Punk Hazard Arc finally came to an end with the defeat of Caesar Clown and his allies, the rescue of the children, and the full bonding of the alliance between Luffy and Law. The Straw Hats set their new allies to the path of Dressrosa to cause a ruckus with Doflamingo's operations and move on with their challenge against the Four Emperors.
This arc is definitely one of the most critical in the One Piece narrative. It marks the first of the Straw Hats' major conflicts within the New World, and it really depicts the increased danger and complexity of traversing this area of the Grand Line. The establishment of an alliance between Luffy and Law is one that simply lays the stage for much bigger conflicts in the future, especially against the Four Emperors. The arc is full of such examples of world-building, which go on to develop the underground trading of the artificial Devil Fruits, and it progresses in the power struggles currently occurring in the New World.
Another thing about the Punk Hazard Arc that Oda has done is that he is setting up the transition for the storyline between the Fish-Man Island Arc and the Dressrosa Arc as the groundwork for the much larger Dressrosa Saga. It also sets up characters and plot points that end up being very important to the subsequent arcs, including samurai Kinemon and the concept of SAD. This arc's explored scientific testing and big destructive weaponry involve a moral grey area, challenging perceptions and reality.