While ArmA II has a built in mission editor, it limits to exactly what you can do. Sure you can place players, enemies, objects and waypoints - but what you can't do is use your own models, characters or story. That's all changed though as Bohemia Interactive has released a full suite of mod tools for the PC co-op title.
The mod tools consist of multiple parts:
ARMA II mod tools require ARMA II version 1.03. The tool suite consists
of:
Oxygen 2 Personal Edition for ARMA II - model editing and animation
package
Visitor 3 Personal Edition for ARMA II - terrain and map editing
TexView 2 - texture convertor and viewer
BinPBO Personal Edition - packer
Sound Tools - sound and lipsync utilities
FSM Editor - tool to edit and compile fsms used in ARMA II
BinMake - conversion tool
Tools Drive - main working directory for tools with mandatory data
files
All these tools are available free of charge and can be found right here.