I don't think that it can find LuaC.exe. Make sure that you 1) have it downloaded and 2) are in the same directory as it.
For example, if you put LuaC.exe in C:/Lua you'd have to type in: C:/Lua/LuaC -o ArcRace1.lur luascript.lua instead.
or... type CD C:/Lua first to change the current directory.
Another alternative which I do is add where ever you put LuaC to your system's path variable. If you do not know what the path variable is, you probably just want to google it as it is more then I want to explain xD