From the section detailing monsters:
Description: A nemesis is more a phenomenon of the universe than a being. A player may choose to fight his particular nemesis a maximum of once per level. When a player decides this, he will instantly be transported to an inter-dimensional arena. There he will find an exact duplicate of himself, including possessions. Then and there the two replicates will battle to the death. If the player defeats his nemesis, he will gain one point in the primary attribute of his choice. If he loses, the player loses a point in that attribute. Note that the GM should ask the player which attribute he is fighting for before the outcome is decided. Win or lose, the nemesis (and all of its possessions) disappears as soon as the death blow has landed. The player is transported back to his former location, and in that frame, no time passes. When the player returns to the former location, all wounds received in the battle with his nemesis will disappear.
Note: Each player has his own arena. Also, if a player passes a level without fighting his nemesis, he has missed his opportunity for that level.