Canonically in GURPS, Arm ST allows you to purchase up the maximum strength of just your arms.
It adds to any attempt to strike, lift, or throw with the affected arm(s). That increases your ST for swing and thrust damage, but not, say, Basic Lift.
The issue is, realistically, I don't think strong arms helps you inflict striking damage. In my experience strikes do not really benefit from disproportionately strong arms. Weak arms can limit you, but once you take away that brake on your power it is body rotation that really benefits you.* You're limited by your weakest link, so having a stronger link doesn't help.
And that body rotation doesn't come from the arms. You don't swing in this order - arm-shoulder-hip. Not if you want to generate power. You swing with a drive off the ground - foot-ankle-knee-hip-shoulder-arm. And the arm doesn't really add that much - you really just throw the arm at the end of a punch, and even with sticks you need to stay pretty slack and let the rotation you've developed hit as you stiffen up again, then relax again. It's stiffening to initiate, relaxing until the moment of impact, then stiffening again. This is aside from throwing sports - the best pitchers, for example, have great shoulder laxity and lower body rotation speed, not great strength in their arms. It's not about arm strength.**
Some of the most powerful strikers I've trained with weren't particularly strong. Two of them were, one with massive arms, but he was also strong everywhere and fast.
So I just don't really buy the idea that strong arms helps you strike or throw well.
I do think that strong arms help you in combat, though, in two areas: grip strength, and crushing strength. True story, I used to think I'd never tap to a head crusher - that's when someone gets your head in between their forearm and biceps and just squeezes. It's not an efficient use of force, on a very difficult target. I tapped to it once from someone who had arms the size of my thighs at the time - 21". He was immense, and squeezed so hard I felt my teeth grinding in my mouthguard. I tapped. He had disproportionately strong arms. Other guys with noticeably strong arms also tended to well in grabbing you and holding on - the jackhammer operator I used to train with was like that . . . he gripped you until he was done gripping you.
So Arm ST should probably add when Lifting ST matters, if the action is largely arms. It would add to grip strength and the ability of your arms to lift, crushing, and squeeze. And that's about it.
In that case, price would really need to drop. 3 points is full-body Lifting ST. Lifting ST for arms only is probably -50%, like Arm ST is in general. That's 1.5 per level, so 2 for +1 and 3 for +2.
One thing I don't allow Barbarians in my DF campaign to buy is Arm ST. That may change if I use these rules and costs, but it's probably easier to just skip it. It's just another "does X count for this roll?" question to be asked by the player that has it, and "helpful" players who don't want their buddy to miss out on a bonus. Still, this makes a lot more sense to me for Arm ST as defined.
* That also why I have so much trouble visualizing two full-power strikes during a true, simultaneous Dual-Weapon Attack. If they're both coming in at the same time so as to confuse your defenses (-1 to defend) or allow a Dual-Weapon Defense (see GURPS Martial Arts, p. 83), then neither of them is really benefiting from any rotation.
** If you want to learn more about pitching, look up Eric Cressey. If you want to learn more about stiffness and relaxation, look up Dr. Stuart McGill - this is a good start.