I have actually implemented Arkano's method long time ago (around the time he posted it) and further extended it.
The original idea there is to compute attenuation based on distance from given object (he used planes only as far as I remember, this can be easily extended to spheres, tubes, triangle(s)). Specular lighting can be implemented in a nice (phong-like) way by using a single ray to perform a "real" reflection of the geometric object. Diffuse still looks good when using just a single point (F.e. the center of the object) - unless the light is too big. Use this with textures and ideally project them along with diffuse (+ use mip maps to blur it) and you've got an awesome lighting system.
If you want a more physically-based solution, well you should be looking at how it is done in physically based renderers (read path tracers). What we do, is to sample the light and calculate the diffuse to each of the samples (well this can also be done for the previously mentioned way - calculating lambert N times is still really cheap). Specular lighting could use the same trick (although the mentioned reflection just looks better as unless you have a lot of samples - you will have a noise, which is a problem).
The real problem here are shadows, of course ray tracing is the ultimate answer here (yet, I assume your scene data are not in a way where ray tracing in realtime is possible) - so you have to stick with shadow maps. Actually omnidirectional shadow maps (cube shadow maps), as for me percentage-closer-soft-shadows (PCSS) worked really nice, again it is not physically correct (but you can get quite close by modifying it) achieving nice and plausible shadows for the objects. Other than that I've seen some guys having really good soft shadows using shadow volumes approach and penumbra wedges, but it was expensive as hell even for less complex scenes.
This is a interactively path traced scene (at around 30-50 spp per second on GPU) with area light. Note the shadows (those are with "caustics" here (not that powerful as the material is not clear and IoR is not high enough)). Yet, you should be able to see that even for quite small light the shadows are fully blurred for the parts that are closer to the light, which is a problem for technically any fast shadow map algorithm these days.