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Information on this is not specific to Arnold, but in order to correctly display the linear renders of Arnold in your monitor's colorspace, you need to set up the color the color management in Houdini in Houdini in the menu Edit > Color Settings... > Color Correction.

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While all the calculations need to happen in a linear color space, all viewing devices (input and output) will need to be shown in a gamma-corrected space (like sRGB gamma).

The main problem when rendering without a proper linear workflow is that lights look overblown and colors look unnatural. The artist then tries to adjust their scene's lighting, falloff, colors, etc. However, this is only possible to a certain extent. The images below show common mistakes artists make when rendering out images with differing gamma outputs:

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