darkSpyro

I know it's probably a silly question, but I have 10/50 in Kaos mode without really knowing what Kaos mode is. Is it the arena type challenges I've been doing, or is it something that I'm doing when I'm playing as a villain instead of as a Skylander?

It's kinda of an arena challenges where you have to build turrets to prevent bad guys from opening a "Doom Box".

So yes, the former.

I've almost finished Kaos mode, and there's really no penalty for letting the Doom Box be destroyed, is there? As long as you can beat the villain inside, it simply re spawns the next round. You don't get the bonus gems either, but it wasn't any significant amount of money.

I would consider it a sort of tower defense mini-game. As said by others it really has no penalties which I find a bit disappointing. It does get quite a bit more challenging in the later levels, lots of villains spawn and swarm your towers... makes playing on hard a treat for sure. I've noticed that the longer you keep towers/box around the more money they spit out though.

I haven't worried about the money. I also haven't bothered making towers - too much getting up and down, changing to Skylanders of different elements. And more recently, as the levels get more challenging, I haven't even bothered protecting the box. It's easier to let it release the evil, then destroy the evil and then finish off the rest of the bad guys.

But yes the lack a penalties is a bit disappointing, it doesn't seem to matter how many Skylanders fall you just get to keep going.