Two words:
Mind control.
The Arena doesn't fit into any reality anyway. Why would heroes just team up to beat up on things and each other?
Since the dev's haven't seen fit to offer up any flavor, I just view it as a danger room. The "villains" I team up with are merely part of the program, holograms and such. The other heroes are real, and trying to hone their skills to fight evil. I mean, after the excercise is over, I'm standing there looking at the heroes, so the villains MUST be holograms.
I usually look at it like this...
Heroes are sanctioned. The government pays them a modest salary for keeping the peace in troubled urban areas, such as Paragon City (usually through Freedom Corps, but they could also be working for the Police, Hero Corps, or any number of other major hero groups as mentioned in teh CoH/V history; my main characters operate as a subsidiary of Freedom Corps, as it was easier to register that way), and the media spin is usually on their side.
"Villains," on the other hand, are not sanctioned. They are just as super powered as the Heroes, but they're hunted down by the law at every turn. Officially, this is the reason you're constantly fighting Arachnos troops.
Essentially, the idea is that there's no difference between a Brute, a Scrapper or a Tank physiologically. However, since a Brute prepares himself for entirely different tactics, he comes off (plays) differently. Scrappers hit hard and hit fast, Tanks weather the fight, and Brutes work themselves into a frenzy, starting by weathering the blows and ending up hitting hard and hitting fast.
"Villains" can't count on support. Heroes can. Each villain type is apparently designed to be able to run solo. It takes a lot more work to make a Hero that can do the same, and some powersets Hero-side just negate the possibility, but most (if not all) of the "Villain" powersets complement nicely.
Now, the short answer to your question...
I don't view any of these characters as Heroes or Villains. They're just super-powered, or extremely capable people, trying make good in the world, or trying to get by.
My Stories
Look at that. A full-grown woman pulling off pigtails. Her crazy is off the charts.
There are competitive heroes or heroes who occassionally let their head get the better of them who have a desire to go at it with one another. It's almost like Flash racing Superman.
As for villains, I've never been to sure how come their arena is connected to the heroes. I've always assumed the villain arenas are a bit older, but the company that makes them all runs off of a single server, which both sides can access.
To answer your question about teaming with them, most heroes wouldn't willingly. It's perfectly acceptable to RP a comment of how much your character really doesn't like working with the scumbag, or your villain making a remark that he hopes the hero doesn't trip up.
Arc ID: 475246, "Bringing a Lord to Power"
"I'm only a simple man trying to cling to my tomorrow. Every day. By any means necessary."
-Caldwell B. Cladwell
The arena is a sport.
Sometimes, sport teams have [censored] teammates.
I don't really know how I got onto this train of thought...but are there any roleplayers out there who are bugged by the fact heroes and villains can team in the arena? I can't really think of a good roleplaying perspective as to why a hero would group up with evil, dirty villains......to beat up other heroes...