My cats like to fight and wrestle, too. I think, in Lily's case, she's still relatively young, so sometimes it's more that she wants to simply play, but despite being younger than Mitsi, she's bigger than her. So when she tries to chase or pounce at or sniff her, Mitsi gets a little spooked as a result.
Mitsi's reactions are really funny, though. Sometimes she'll just put her paws on Lily's head and hold them there for a moment, only to run away, but much of the time, if she and Lily are in sort of a face-off, Mitsi will do this thing where she'll try to scoot away...but she'll do so veeeeeeeery slowly. She'll take one tiny side step, then sit there for, like, two minutes just staring at Lily. Then another tiny side step. More staring. And so on. And Lily will just sit there and watch her do this until one of them makes a move after a time.
I also love when they stare each other down 'cause they look like they're rival gang members preparing for a rumble or something :p.