Wikipedia says: "An 'arms' name can just derive from where the pub actually is" or "Some 'arms' signs refer to working occupations. These may show chaps undertaking such work or the arms of the appropriate London livery company. This class of name may be only just a name but there are stories behind some of them." https://en.wikipedia.org/wiki/Pub_names
From Heraldry,as in "coat of arms".
The sign would have the arms of the current monarch(kings/queens head),a guild(bricklayers/bakers arms)or even a town(Manchester arms).
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