According to Hitler himself, says the person who eavesdropped on him for what today is the book "Hitler's table talk" which you can find free on the internet:

What Hitler is doing there IS the original Nazi salute. He refers to it as an old "German" salute, but the first time he ever saw it was in the early 1920's.

It is essentially showing to whoever you give it to that you are unarmed.

Hitler relates that the SS then militarized it into the fully- outstretched version that you are probably thinking of.