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The Coliseum appears in The World of Ruin, which is more or less the second half of Final Fantasy VI. Here, players can bet items and face off against a beast depending on which item they bet (insignificant items usually lead to a battle against Mr. Chupon). Victory nets players a better item than the one they bet in the first place.
Battles are automated in the Coliseum, so once you select the party member to fight for you, you relinquish all control over that fighter. You're left to rely on the artificial intelligence to make the right decision given whom you've chosen, what spells and skills s/he's learned, and what you've equipped on him or her.
After all of the drama he experiences during the game, Ultros  ends up working at the Coliseum as a receptionist.

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