How do you beat the third form of Vaati?

When his ares pop out of the ground and chase you hit it with the cane of pacci the are will stand stiff straight up shrink down to minish and go in the arm and destroy it.

The above submission is correct, but it's slightly incomplete.

In order to destroy the arms, hit them with the cane of pacci, minish, and then go inside them. Inside, there are a bunch of floating eyes. The only one you need to destroy is the one with a red pupil. Try and get him in a corner and hack away.

The second arm is a little different. Once inside it, you need your lantern to see. That's the only difference. Still find the red-pupiled-eye and kill it.

That was the easy part...

Now, once the arms are destroyed, the multiplication begins. HOWEVER, wait to multiply until DIRECTLY after the lightning orbs pass you (i.e., stand with your sword charged and ready to go, dodge the obrs, then multiply). Then, you need to stand in front of the four smaller eyes in front of Vaati. YOU MUST BE STRAIGHT AND DEAD-ON!!

The smaller eyes will "charge up" and fire more of those energy orbs. Swing your sword at the right moment, and the orbs will go right back where they came from and destroy the smaller eyes. If you're not dead-on, the deflected orbs will fly in all directions and only take out some of the smaller eyes. ALL OF THEM MUST BE GONE!!!

Once Vaati falls to the ground, go up to him and start the hacking. Try to be fast about this whole process (the orb deflecting) so that you have the other Links helping you out with the hacking.

You'll have to do this about two more times (don't quote me on that). After that, you'll have to sit through a short little cut-scene and the credits. Then, save when it asks you. When you load your file, you will be outside of Dark Hyrule Castle before you have to fight Vaati with whatever health you had left at the end of the battle.

-THIS SHOULD BE DONE BEFORE YOU FIGHT VAATI FOR THE FIRST TIME-
Remember those gorons near Lon Lon Ranch? If you haven't gotten the bottle at the end of that tunnel, get it. Once the digging is complete, fuse kinestones with the goron on the extreme right. The Biggoron at the top of Veil Falls will wake up. Go talk to him. He says once you do something big, come back and talk to him. Unfortunatley, that "big thing" is beating the game twice (beating the game just means defeating Vaati).

Once you do that, come back and talk to him. He talk to you a little bit, then he'll ask you for your shield. Give it to him. He'll be muching on it for a little while. I don't remember the amount of time you have to wait. But what I did was I bought another shield at the shop, and beat Vaati again. (Hey, at this point, I was doing it for kicks...) When you go talk to him again, He'll spit out your old shield and give you the Mirror Shield (SWEETNESS!!!).

I love this shield. The coolest thing it does it this. Equip it, face one of the Octorocks throughout Hyrule, and when it fires a rock, the rock will harmlessly bounce off of the shield, but it will fire a beam of energy at the Octorock, obliterating it! That's baddass!

I hope all of this helps. I know you didn't ask about the Mirror shield, but I got typing and just kept going. Any other questions, just drop me a line.

Enjoy.