Hi Alpha,
These are very broad questions and honestly they depend on eachother. You could play, or watch, or both (if multitasking is your thing).
You do need to own Terraria to play on the server - if you don't own it already you will have three chances throughout the event to win a copy of the game through Steam. We would love it if you could come and watch! You can also come and chat to us on our TeamSpeak server if that's more your thing.
If you want to find out more about PoniArcade, visit our website.
Hope to see you there!