What is recommended for physical therapy for older adults with arthritis?

Low impact. Aquatics, body weight, or resistance bands/ tubing biking, and/or elliptical. Aquatics allow you to perform body weight exercises, but being in water actually reduces the stress on your body due to buoyancy. Once you are able to perform body weight activities then look to add light resistance w/ bands/ tubing.
Pool? I recommend exercises that maximize mobility with as little stress on the joints as possible. Pool (aquatic) therapy is great for this. The classes are also a wonderful social experience, and most insurances will cover this with proper documentation.