If Term is a list (N must be either the integer 1 (for the head) or 2 (for the tail), unifies Arg with the head or tail of the list. This is a consequence of the fact that ./2 is the list functor and .(a,.(b,.(c,[]))) is the same as [a,b,c].
If N is a list of integers and Term is a nested structure, then Arg is the subterm of Term described by this list of integers. E.g. arg([2,1,3], Term, Arg) is the same as arg(2, Term, T1), arg(1, T1, T2), arg(3, T2, Arg).
Success:
arg(2,foo(boo,moo),moo).
arg(2,.(a,b,c),b).
arg(2,.(a,b),b).
arg(2,term1(term2(a,b),c),c).
arg(2,f(a,f(a,b)),f(X,Y)). (gives X=a; Y=b).
arg(2,[a,b,c],[b,c]).
arg(2,.(a,.(b,.(c,[]))),[b,c]).
arg(2,[1],[]).
arg([2,1], f(a,g(b,c)), X). (gives X=b).
Fail:
arg(2,f(a,f(a,b)),f(X,X)).
Error:
arg(N,f(1,2),1). (Error 4).
arg(N,[],X), (Error 5).
arg(0,foo(boo,moo),moo). (Error 6).
arg(3,foo(boo,moo),moo). (Error 6).