Short-sleeve rashguards provide the basic amount of protection from the sun, but the rest of your arm still needs protection. I prefer the tighter shirts as I can swim better, the loser ones tend to hold me back.
Long-sleeved rashguards are the ultimate when it comes to protection. They cover you all the way to your wrists, so you only need to sunscreen your hand instead of your whole arm. They also help to keep you warmer as they provide a bit more insolation.