Athene was generally a beneficient goddess, despite her role of goddess of war. In fact, she was believed to have shown motherly instincts for Athens. However, like all Olympians except Hestia, she had a vindictive side, and could inflict terrible punishments on those who offended her. Witness the following examples:
Arakhne was the daughter of Idmon, who was a humble man. He earned a living by dyeing wool with Phocaean purple. They lived in a small village, Hypaepae, which was in Maeonia, part of Lydia. Oreads and Naiads left Mount Tmolus and the River Pactolus to watch Arakhne working at her loom, and to admire her finished masterpieces.
Some said that she had been taught by Athene herself. Arakhne, however, denied this. She said that she was willing to compete with the goddess herself. Athene, upon hearing this, disguised herself as an old woman, and went to Idmon and Arakhne's cottage, to try to talk some sense into her. Arakhne was furious, and asked why Athene did not come. Athene revealed her identity, and the contest began.
Athene wove a picture of the naming of Athens. All the Olympians were there, idealised, along with Nike (Victory). In each corner of the tapestry, there was a miniature scene showing the fate fo a mortal who had offended the gods. Arakhne's picture showed the gods' love affairs. Zeus was carrying Europa off as a bull, reclining with Leda as a swan, disguising himself as Alkmene's husband, and in many other guises. Poseidon and Apollon also featured.
Athene could not fault Arakhne's work - it was, indeed, as beautiful as her own. The goddess was enraged - partially because of the disrespect shown to the Olympians, but mainly because of her rival's skill. She tore the tapestry into shreds, and struck Arakhne's forehead four times with her shuttle. Arakhne fastened a noose around her neck to hang herself - but Athene pitied her, and sprinkled her with juice from Hekate's herb. Arakhne was transformed into a spider, and the rope into a cobweb. She still weaves, but without colour or people.
According to one myth, Athene won the contest. She challenged Arakhne to a contest, disguising herself as one of her own priestesses. Arakhne accepted. When Athene won, she revealed her identity. Athene declared that her vanity had to be punished, but turned her into a spider rather than killing her - for Arakhne's work was beautiful, if inferior, and Athene was merciful.
Medousa and her sisters, Stheino and Euruale, were originally great beauties. However, Athene turned them into hideous creatures, with snakes for hair, teeth that were too large for their mouths, tongues lolling over their lips, and gazes that turned men to stone. There are, to my knowledge, two legends explaining Athene's wrath.
One says that Medousa slept with Poseidon in the temple of Athene. The incensed goddess transformed the beautiful Medousa and her sisters into the hideous creatures we call Gorgons. Athene was not appeased even by this terrible punishment, and helped Perseus to kill Medousa - and, some say, made her aigis from her skin. At any rate, most say that Medousa's head was placed on the aigis (either a shield or a goat-skin). One source stated that Erikhthonios recieved two drops of Medousa's blood from Athene, which was handed down to his daughter, Creousa. Another legend says that Medousa had claimed to rival Athene in beauty.
One legend says that Athene was responsible for Teiresias' blindness. His mother, Kharilko, was a friend of hers. The young man happened to see Athene while she was bathing in a clear pool. Athene either splashed water on his face, or laid her hands over his eyes, thus blinding him.
This recalls the legend of Aktaion. However, Athene was much more generous than Artemis. Not only was Teiresias not killed; Athene gave him the gift of prophecy. He became famous for his predictions. For example, he knew that Oidipous had killed his father and married his mother (although he tried to hide it).