i have seen a boy before with a huge lump like you are talking about in his arm. it was a skate boarding accident or something. i don't remember what it was, but he had it there for a really long time and it got to where it didn't hurt anymore and he could move it around. it looked and felt really weird. sorry i am no help, but i have seen it before and don't worry the guy lived.
Needless to say, he has to see a physician.
It is impossible to know with certainty what the lump is from an internet post, but the most likely scenario is that some minor blood vessels were crushed and leaked. The leaked blood then congealed. The swelling impinges on nerve endings and causes discomfort. Sometimes it absorbs, sometimes it becomes infected, and sometimes it becomes rock-solid has to be suctioned out or surgically removed.
Everybody does arm punches. It is a male tradition going back centuries. I hope he gave back as good as he got.
Usually there is a co-factor that causes a complication. Taking aspirin, for example.