Hunters are extremely good in Battlegrounds; I pumped out 413,696 damage in a 38 minute WSG the other day. A big reason is half the time no one pays attention to the Hunter shooting in the back, and just like a Mage, if left alone you can do amazing damage. Difference is Mages are always focused. Battlegrounds are also based around short fights so your pet is less likely to get focused and you're less likely to go out of mana. You either die or can easily drink between incomings. You also don't have as many line of sight issues and good spaces to kite like the Mine in Arathi Basin.
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Never did arenas yet but if a hunter can do so well in BG, why not arena?
Well there's a lot of reasons. One is our pets are sitting at 7k health or so with no resilience. The higher up the ranks you go, the more teams will try to kill your pet and geared players can kill it pretty easy. That's why the cookie cutter MM builds have Improved Pet Resurrect. My Warrior has 2/5 S3 and the rest S1/Vind, and 2v2ing with a Mage friend I killed a Hunter's pet not meaning to. Between Sweeping Strikes and Whirlwind it had died without me ever targeting it. A full S3 Warrior could do it even easier. Build up some rage then Intercept, Mortal Strike, Whirlwind, auto-attack and execute is a dead scorpion.
Another is line of sight. There is either a pillar, coffin or bridge on every map that can be used to avoid line of sight. If a Druid runs around a pillar I have to close in and Wingclip, then pop out and shoot, then repeat again. Where as a Warrior or Rogue can just keep a snare on and follow the Druid. It's easy to duck behind a pillar to avoid some incoming damage. You can also use them to your advantage but obviously a class like Hunter or Mage suffer from LoS more than a melee does.
Mana is also a big issue. Unless one side is a double dps team the games can last a lot longer than your typical fights in a BG. Some high rated games can really take awhile. Even with my poor ratings at the 1600s I've had a 16 minute game, which is longer than most WSG games I play. On average my games last from 5-10 minutes. Our mana pool is low and once you're out of mana it's sometimes hard to get a drink. We have Aspect of the Viper which helps and most Hunters, myself included, have two one-handers with +30 Intellect enchants to help with that. But it's still an issue since an oom Hunter is useless.
Being focused is another problem. If you're MM and get a good Rogue or Warrior on you then it's hard to get back to range, you also drop your DPS considerable while trying to do this. It's just too easy for a melee to keep a Hunter in range and we don't have many "oh crap" buttons. The mail armor is nice but doesn't make much difference with a geared Warrior/Rogue on you. The common Rogue build has Evasion, Cloak of Shadows, Vanish, Sprint (all of which can be used twice with Preparation except Cloak of Shadows), along with a three second bubble near death with Cheat Death. The common Hunter build has Deterrence and Scatter Shot as far as "oh crap" abilties go. Once someone is on you, you have to melee and our DPS drops a lot.
Most of this is from a MM Hunter perspective in 2v2 since that's what I normally play. Don't have a good rating and not claiming to be good, but I do think I at least understand some of our problems. Bestial Wrath is a great ability against Rogue/Warrior but easily countered, and BM is a worse spec than MM if you do healer/Hunter. You need Silencing Shot, Improved Stings, Scatter Shot for an effective Freezing Trap, Efficiency for better mana management and so on.