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That's the TL;DR explanation. Here's the longer version:
It happened barely a year after Gray Davis had been re-elected to his second term; he'd survived the PG&E "rolling blackout" crisis and mopped the floor with a rank amateur Republican. He was still pretty unpopular, due to the lingering effects of the power crisis, and then by signing into law a pretty drastic increase in vehicle licensing fees (cost to get your car registered).
In the midst of this, state Republicans started a recall campaign, which for a while looked like a joke, until Daryl Issa poured a couple million into it, in hopes of becoming the replacement governor himself.
Due to kind of complicated reasons, the recall election was scheduled to happen 76 days after the petition was certified. The election contained two "votes": should the governor be recalled, and if so, who should replace him. There were 135 candiates of the second part of the ballot. The Democratic lieutenant governor became a candidate but campaigned for people to vote against the recall. A bunch of Republicans got on the ballot, but almost all of them dropped out when Arnold showed up.
Arnold essentially ran a six-week campaign (he declared his canidancy "late"), which worked well for him. It was too short of a time period for any scandals to pop up (though some reporters said they sat on the mistress story back then, because they didn't have the evidence to back it up). He used his stature as a celebrity, and was seen as a moderate Republican. He also only participated in one debate, the one where he got all the questions in advance. He also handled himself well during that debate when dealing with Arianna Huffington (yes, she was in the top eight of the candidates), who antagonized him the entire time.
All of this lead to the recall passing with 55% of the vote and Arnold being chosen as the governor after receiving 48& of the vote. -----------------
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