Josephus writes that arov was a mixture of wild animals while Philo suggests that it was types of flies (quoted in Jacob, 1992, pp. 266,267). This argument continued in the Midrash. Shemot Rabbah (11:3) quotes that R. Yehuda suggests that the fourth plague was a mixture of wild beasts, while R. Nehemiah argues that the plague was gnats and hornets. The author of the Midrash favors R. Yehuda since he notes that 8:27 records that G-d removed all of the arov, which suggests that the arov had some value being dead, which he claims is the skins of the wild beasts. Possibly for this reason, this definition has become the traditional approach, see Rashi and Ibn Ezra on 8:17.
Luzzatto (on 8:17) argues that arov cannot be wild beasts since 8:17,20 record that the arov entered the house of the Egyptians, and if it was wild beasts then the people could have closed their doors and kept the animals outside. Furthermore, Benno Jacob (1992, p. 266) argues that arov cannot be wild animals since the plagues were not meant to be lethal, while if there really were wild animals then the plague would have killed large numbers of the Egyptians something not mentioned in the Torah. Yet, if arov is a mixture of insects, then it seems to have been almost identical to the previous plague, kinnim.
One clue to the difference between arov and kinnim is that the kinnim appear to have been in the air like dust and they affected people and animals, 8:13, while the arov was on the ground and seems to have affected the Egyptian homes, 8:17,20. In addition, the Torah does not record any damage due to the kinnim. Kinnim, which was the third plague in the first set of three plagues, appear to have been annoying as were the other two plagues (blood and frogs) in the first set of plagues. On the other hand, 8:20 records that the arov caused great destruction, but what was the destruction? It could not have been the destruction of the crops since that occurred later by the plagues of hail and locusts, 9:31, 10:15. The Torah twice refers to the arov as entering the homes of the Egyptians, 8:17,20, and on the second occasion this description precedes the statement that the arov caused great destruction.
My guess is that kinnim were insects that fly while arov were terrestrial insects. Some terrestrial insects (ants, termites) can cause great destruction to homes, and then the destruction attributed to the arov was to the Egyptian homes, something unique in the plagues. I am not sure what the Egyptian homes were made of, wood, stone, mud, and/ or dung, but the arov could have been a mixture of terrestrial insects that were able to eat through the building materials of the Egyptian homes.
8:18,19 note that the plague of arov would only affect the Egyptians, G-d would make a division (pedut) between the Jewish people and the Egyptians by this plague, and the plague would be a sign of this division. This distinction was not just that by the Jews there were no insects, while by the Egyptians there were insects, as this was the only plague that the Torah specifically states that it would be a sign (ot) of the division or separation between the Jews and the Egyptians.
What was the sign from the plague of arov? When terrestrial insects appear in the multitudes, they cover the ground, which takes on the color of the insects. However, since the insects did not enter the land of Goshen, they would have formed a line on the ground between the land of Goshen and the rest of the Egypt, which would be the sign that the plague only affected the Egyptians and not the Jewish people.
(There were other plagues where this division was very evident, as for example the plagues of darkness and the deaths of the Egyptian firstborn sons, 11:6,7, but the Torah does not use the word ot by these plagues. The word ot does appear by the blood on the homes, 12:13, and I believe that the sign here by arov would be similar to the sign of the blood, which was a red line. It is possible that the Torah makes a point of the plague of arov being a sign of this division between the Jews and Egyptians since this was the first plague where this division occurred, see Ibn Ezra on 7:24.)
Jacob, Benno (1869-1945), 1992, The second book of the Bible: Exodus, translated with an introduction by Walter Jacob, Hoboken: Ktav Publishing House.