Apparently when a baby is placed onto its back, it has a startle reflex that makes its arms fly out for protection - i guess a bit like if you were dropped you would put your hands out to protect your head???
Anyway - because babies have such a short sleep cycle, they are in REM sleep (active) every 20mins or so I believe, and if they are able to move their arms, they may fling them out.
This always wakes Jenna up, so we swaddle her tightly to sleep. I guess some babies may be heavier sleepers so the arms thing doens't wake them up, and maybe the reflex is different in all babies.
Do what gets you and Jackson the best nights sleep. I've been told that once they can roll over in their sleep you should stop it. Also, some babies like being swaddled with their hands beside thier bodies, other babies like it with their hands across their chest.
HTH
Fi