Ballista arrows are created at a siege workshop and used as ammunition by a ballista. Wooden ballista arrows are made using one log, and more powerful ones can be made using one log plus a metal ballista arrowhead from the forge.
Additionally, ballista arrows can be destroyed by hitting too many targets in a row. After a certain number of impacts, the arrow is simply destroyed. Hitting around 5-6 goblins at a time seems to be the rough limit of a ballista arrow's durability. It is currently unknown if adding an arrowhead improves this durability.
See also: Siege engine