Surprisingly well. Yes, some of the effects are 80's-tastic: there's the animatronic head sequences and some really bad-looking stop-motion animation. And the synth music that dominates the score is twelve different shades of cheesy. But on a drama-and-action front, it works pretty decently. Most of the movie is run-and-gun car chase sequences, interspersed with flashbacks to the future (yeah, I know) that feature man-versus-machine sci-fi war. Now I can't tell you how many times I watched the sequel, but I haven't seen the first one all that much--the one that actually establishes the mythology (and much of the design) of the series. And revisiting it has cast some elements of the sequel in a new light.
For instance, Dr. Silverman, the psychiatrist treating Sarah in the second film, treats Reece in the first. Somewhat incongruously, he ignores the fact that the two patients independently experience the same neurosis about Terminators. Which is not to say that it couldn't have been explained away with a few lines of dialog or by casting a different actor as the shrink... not a big deal, but it bugs me a little. Then there's the logic of time travel in the two movies.
Similarly to 12 Monkeys, The Terminator subscribes to the Oedipus Rex school of time-travel: attempting to change the future actually brings it about. Based on the fragments of narrative we get from Kyle Reece between explosions, the machines didn't attempt time travel until they had no other option--their defense grid was smashed, humanity had won the war thanks to one John Conner. So they sent a terminator back in time to prevent his birth--but if they hadn't, Kyle Reece would never have been sent back, and John Conner would never have been born.
This implies a timeline that cannot be altered--you can't actually change the past, if you go back in time, it's because you were already there (again, see also 12 Monkeys). But in the second one, the past actually does get changed. The resolution of the plot is that Judgment Day appears to have been averted. If you follow the series' continuity, Judgment Day is postponed, rather than averted, but the timeline has been changed nonetheless.
One can wax philosophical about time travel all day. Regardless, what we have here is a smart, taut action film that still resonates, even if it looks a bit dated.
Also, Bill Paxton is horribly miscast as a "tough" (see also: Aliens).
So, that's fun.