An amnesty is a new rule where a team can do it (amnesty) to 1 player per season. Meaning that contract does not go against their salary cap. The Team still has to pay that player. So Orlando should be still paying Arenas meaning another team would get him for very cheap.
I'm pretty sure that's correct.
It came in so that say you have a $20 million player get injured seriously (say 2-3 lean years of injuries like Michael Redd and Arenas) they can amnesty them and wipe it from the teams salary cap. This will allow the team to still have a chance to rebuild.