Arm candy means someone who is very beautiful and adorable giving companion to another maybe for a party or social event but not romantically involved with that particular person. Like she is my arm candy just to make jealous to my girlfriend. Or My Secretary is my arm candy for a business party.

Arm candy means a beautiful person, usually a young woman, that you lock arms and hang around with. This person is called candy because they are attractive. It's typically a sexist term. Many men have no interest in a woman's intelligence or personality and are instead only looking for arm candy Come over here and be my arm candy, sweetie.

I suspect that it might be related to "eye candy", a term meaning something sweet to look at. Here, perhaps bending the metaphor, they are saying "arm" as the candy might be on your arm, arm in arm with you.