This friendly dragon is just an optional boss that you wouldn't even know you could fight unless you hit him. He actually gives you an item that helps you get to fight Nashandra (the final boss of Dark Souls II).
However if you're daring enough to accept the challenge (or just want to say you've killed every boss), prepare for a battle against the boss with the most HP out of any other boss before him. His fire attack will engulf the whole arena in flames and is almost impossible to evade. This boss feels like it lasts a lifetime because it is way longer than most boss fights last. Some of the best players still can't beat this fight in less than 5 minutes. That's about all this fight equates to, there isn't too much to say about him.
To conquer this dragon, make sure your armor and shield (if you use one) has A LOT of fire resistance. Also make sure to wear a flame quartz ring for more fire resistance. When the Ancient Dragon is on the ground, attack his feet and watch for a fire breathing attack to get you to move. Do NOT get greedy with hits, play it safe and the fight will be as painless as possible.