Assuming this is 3dsmax, your vertex weights need to be edited. In max, under your skin modifier, you can edit how much influence each bone has over the mesh. This can be done by moving the \"envelopes\" or modifying properties for each \"vertex\" point.
You can also select each verticy, or group, and decide exactly how much it, or they, will be influenced by each bone.
*In your case it looks like the bicep/tricep bone has too much influence over the forearm mesh.*
\"Paint weights\" also come to mind. I used those sometimes, when I did 3d.
If you want your muscle to bulk up when you curl the bicep you can use 'wire parameters', found in the animation menu.
Have fun; - hope that helps.