You'll have to get a special PPC version of linux to run on an iMac G3, and it won't run arduino either 
As far as I know, an iMac G3 SHOULD be able to run a recent enough version of Apple OSX to run Arduino SW; It won't be a very zippy machine, but it ought to work. Whether it's worth buying a newer version of OSX when you can probably get a used P4 linux-capable system for a similar price is a separate question... (depending on where you are, you can probably find someone to GIVE you a linux-capable P2 or PIII system for free...)