This excerpt is taken from Sheikh Farooq Rafi Sahib's book Qurbani, Aqiqa, and Ashra Zil-Hijjah.
The fast of Arafah holds great virtue because fasting on this day expiates the sins of two years, one past year and one coming year. Therefore, observing the fast on this day is a highly recommended act. It is narrated from Sayyiduna Qatadah (may Allah be pleased with him) that the Prophet (peace be upon him) said:
صيام يوم عرفة أحتسب على الله أن يكفر السنة التى قبله والسنة التى بعده
"I hope from Allah that the fast of the day of Arafah expiates the sins of two years, one past and one coming."
Reference: Sahih Muslim: 1162. Sunan Abi Dawood: 2420. Jami` at-Tirmidhi: 749. Sunan Ibn Majah: 1713.
Benefits:
The scholars state that the fast of Arafah serves as expiation for two years' worth of sins, referring to minor sins. If there are no minor sins, then there is a reduction in major sins, and if the fasting person is free from both minor and major sins, then their ranks are elevated accordingly. Thus, Mulla Ali Qari, in Mirqat Sharh Mishkat al-Masabih, quotes Imam al-Haramayn's statement: "The fast of Arafah erases minor sins."
Qadi Iyaz says: "The Ahl al-Sunnah wal-Jama'ah also hold this view. However, major sins are only erased through repentance or Allah's mercy. If it is objected that how can the fast of Arafah be expiation for the sins of the next year, when the sins of that year have not yet occurred? The answer is that Allah will protect the fasting person from sins in the coming year, and another opinion is that Allah will reward them with such mercy and reward that this mercy and reward will serve as expiation for the sins of both the past and the coming year."
Reference: Tuhfat al-Ahwadhi: 377/3.
Fasting on the first nine days of Dhu al-Hijjah is a Sunnah and a recommended practice of the Prophet Muhammad (peace be upon him), therefore observing fasts on these days is permissible.
It is narrated from some of the Mothers of the Believers:
أن النبى صلى الله عليه وسلم كان يصوم تسع ذي الحجة، ويوم عاشوراء، وثلاثة أيام من كل شهر، أول اثنين من الشهر والخميس
"Indeed, the Prophet (peace be upon him) used to fast the first nine days of Dhu al-Hijjah, the tenth of Muharram, three days of every month, and the first Monday and Thursday of the month."
Reference: Sahih Sunan Abi Dawood: 2437. Sunan an-Nasa'i: 2419.
The chain of this hadith is authentic. All its narrators are trustworthy, and Hunaydah ibn Khalid is a companion and his wife is a respected female companion, so their being lesser known does not detract from the hadith.
A contradiction and its solution:
The above hadith is evidence that fasting during the first nine days of Dhu al-Hijjah is a Sunnah and recommended act. However, this hadith is contradicted by the narration of Sayyida Aisha (may Allah be pleased with her):
ما رأيت رسول الله صلى الله عليه وسلم صائما فى العشر قط
"I never saw the Messenger of Allah (peace be upon him) fasting during the ten days of Dhu al-Hijjah."
Reference: Sahih Muslim: 1176.
Imam Nawawi (may Allah have mercy on him) presents the solution to this contradiction as follows:
"Scholars explain that the hadith of Aisha (may Allah be pleased with her) may create the misconception that fasting during the ten days of Dhu al-Hijjah is disliked; here, the ten days of Dhu al-Hijjah refer to the first nine days of Dhu al-Hijjah. Drawing this implication does not establish the dislike of these fasts; rather, fasting on these days is highly recommended. Especially the ninth of Dhu al-Hijjah, the Day of Arafah, holds special recommendation. The virtues of this day have been mentioned in previous hadiths, and it is narrated in Sahih Bukhari that the Messenger of Allah (peace be upon him) said: 'The deeds of the remaining days are not superior to the ten days of Dhu al-Hijjah.' (This narration is evidence that, like other acts of worship, fasting on these days is also superior and recommended)."
The hadith of Aisha (may Allah be pleased with her) that the Messenger of Allah (peace be upon him) did not fast during the ten days of Dhu al-Hijjah should be understood as (possibly) due to some ailment, illness, travel, or other reasons, he may not have fasted on these days, or that Sayyida Aisha (may Allah be pleased with her) did not see him fasting on these days. Her negation does not necessarily imply the negation of the fasts themselves, because the affirmation of these fasts is also supported by the narration in Sunan Abi Dawood and Sunan an-Nasa'i that the Messenger of Allah (peace be upon him) used to fast the nine days of Dhu al-Hijjah.
Reference: Sharh an-Nawawi: 72/8.