That illustration is not particularly well done. Figure 3 says to bring the arms to the side of the body; but, doesn't mention that the forearms, wrists and hands should be brought towards the midline of the body to avoid injury. This is depicted in Figure 4 (on the down side) and should have been stated in the text. It should also have stated that the lower arms can be brought toward the midline of the body down low to the groin; or, up high to protect the head (preferred).
The lower arms should be brought up to protect the head in most cases. Sometimes they have to be in a low position such as pulling down on the risers and flaring a rectangular parachute before doing a parachute landing fall (PLF), controlling a rope through a rappelling/climbing harness, holding attached gear out of the way so as not to land on it...etc.
The technique is applicable to many situations, not just the ones mentioned. It is perhaps best known in parachuting application. Below are a couple of vids (the 2nd a 20 sec. excerpt) and a Wiki article that demonstrates the technique applied as a PLF. If it'll work there, it'll work just about anywhere: