Most newborns will benefit from being swaddled for sleep. They appreciate the feeling of being securely wrapped, like they were in the womb, and will often calm and sleep better when swaddled. When babies are born they also have a startle or Moro reflex where when the front side of their body is exposed to space, their limbs will "startle" and wake them up. As adults, I think this startle probably feels similar to the feeling of falling and being startled awake in the early part of adult sleep.
Just like anything else to do with baby sleep, swaddling needs to be done safely.
Baby should always be placed on their back to sleep when swaddled.
No additional loose blankets in the crib or sleep space.
Ensure that your baby is wearing temperature appropriate clothing and that the swaddle blanket is lightweight and breathable to avoid over-heating.
The swaddle should be kept loose over the baby's hips to allow the baby to bend their hips and legs.
You want to be able to fit at least 2 fingers between the baby's chest and the swaddle.
Transition your child out of the swaddle once they are rolling and getting their arms free of the blankets.
If your child will be entering a childcare facility when they are less than 3 months old be sure to ask if there is a policy either for or against swaddle babies for sleep. Some facilities have adopted a no-swaddle policy due to the risks of swaddling too tightly or restricting hip movement when caregivers are responsible for the care and safety of multiple children.
Some newborns do not appreciate being swaddled and actually sleep better when they are not swaddled. There is an interesting link between babies who seem to hate the swaddle and the incidence of a tongue tie. Babies who have significant tongue ties can develop restriction in the growth and length of their jaw, neck and pectoral muscles. These babies are often more comfortable sleeping with their arms stretched overhead. If your child prefers to sleep with their arms free I recommend an oral assessment to check for a possible tongue tie.
Most babies are ready to transition out of the swaddle by 3-4 months of age. The Moro reflex has diminished by this time and they are becoming increasingly mobile. Transitioning out of the swaddle can be a challenge for babies who have been sleeping well. There are several wearable blanket options available as alternatives to the swaddle. Do your research and choose something you feel will help make your baby comfortable for sleep times.