I've lived in Arequipa for close to five years and agree with just about everything said above. For me, it's big enough to be interesting without being metropolis sized. Traffic and the resulting pollution are at their worst in the center part of town, but not nearly so much in other parts of the city and nothing compared to Lima.Where I live it's very quiet, but there are banks, restaurants, cinemas, etc. within a few minutes walk. It's a very walkable city overall with a European feel. The food is exceptional, the cost of living is reasonable, the weather is great if you like a dry climate with near year round sun and spring like temperatures.
I've never felt unsafe. Never had any issues. Like any city, there are parts that are dodgier, but I've never had a reason to go to them at night. I've walked home from the center part of town in the middle of the night back to Cayma and never felt it was unsafe, but I'm tall and carry myself with confidence, so that might have something to do with it.
I'd recommend a meal at Zig-Zag; Peruvian-Euro fusion. A bit, but not much more expensive than other restaurants and much less than what you'd pay for similar quality/dining experience in the US or Europe.