SplinterGlossary: Challenge Opponent
The Challenge option can be used to challenge an opponent to a duel. The option can be found on the top menu of the Splinterlands interface, on the Battle page.
The player which is challenged receives a notification in-game after the challenge has been made and has the option to view the details and then, accept it or not, or decline it directly.
There is a timer that is set when the challenge is made. If the opponent doesn't accept the challenge within a couple of minutes, it expires automatically.
There are no prizes/rewards associated with challenge games, at least not officially. If the two have some side-bets, they are not done through the Splinterlands interface.