Disclaimer : I am not a physio, just familiar with the anatomy involved.
The cartilage of the knee joint covers the articular surfaces of the bones (the ends that 'touch' another bone when the joint between them moves) to make them slide over each other smoothly - it really isn't accessible through the surface of the skin, no matter how strongly the physio manipulated the surface, it's just too deep inside the joint. The meniscus (the fibrous cushion on the top of the tibia) is sometimes referred to as cartilage, but even that is pretty inaccessible from the surface; only some of the edge of the meniscus could be reached, with ligaments etc. covering other parts of it.
If the physio was trying to break up scar tissue, it wasn't the cartilage he was working on (cartilage doesn't scar) but the muscles and/or tendons crossing the knee joint. Scar tissue is broadly made up of collagen, which is stretchy, but not as stretchy as the muscle/tendon fibres it replaced. The collagen fibres also tend to settle higgledy-piggledy when the scar is formed, in contrast to the muscle/tendon fibres which all lie aligned with each other - this contributes to the lack of stretchyness of scar tissue, as some of it's stretch is in the wrong direction IYSWIM. So scar tissue in a muscle/tendon means that it can't move as freely or as far as it could have were there no scar tissue there, and that affects the joint that the muscle crosses (all muscles cross a joint - the purpose of every muscle is to move the joint it crosses). If the physio was working at the back of the knee, it was probably the hamstrings he was working with. They all attach at different places, so pull in different directions. If one of them was scarred, there could be uneven forces pulling on the knee, pulling the bones out of their proper alignment to each other - maybe what the physio meant when he said the knee was bent. Or if several were scarred, the knee might be difficult to fully straighten as all the scarred hamstrings would be a bit tight. Either way, walking on a bent knee would affect the hip, throwing it out of its natural alignment; the spine would then compensate in the other direction to carry the head and shoulders horizontally, and in this way a knee issue would result in a back problem.
It sounds to me as if the physio was using a technique called 'transverse frictions', where the fingertips are pressed deeply into the flesh and moved side-to-side rapidly across the muscle/tendon perpendicular to the muscle/tendon fibres (imagine the fibres as lots of guitar strings being strummed). No oil is used in this technique as the physio doesn't want to slide over the surface but to friction it, dragging the surface (and anything attached to that surface) with his fingertips. This will irritate/inflame the underlying muscle/tendon because the frictions break some of the fibres, particularly the more inflexible fibres (the ones with the scar tissue attached). As it heals, if the muscle is stretched properly during the healing process, the new collagen can be encouraged to align alongside the muscle fibres and the muscle regains its stretchyness; so the joint moves properly again. The redness and swelling are part of normal healing.
Your friend had an operation to repair cartilage in his knee, which means it was considerably damaged. The body self-repairs cartilage, but it can't make it as-new, it's always a patch job. Once the damage has started the body can generally keep on top of the constant patching, often for decades, but eventually the body ages and repairs more slowly; it's not patching the cartilage fast enough and the damage increases to the point where the cartilage is worn through to the bone and pain can be felt (cartilage has no nerve supply, so feels no pain - the underlying bone does have a nerve supply). Common repairs include microfracture to stimulate the body to speed up repair, or shaving off damaged loose cartilage (and meniscus) to get a smooth surface that will move freely again. Again, the cartilage does not end up as-new. So if the body still can't self-repair fast enough, the damage can extend again until pain is felt again. If the knee is out of alignment through scar tissue, this could increase the contact between the tibia and the thigh bone, making new damage more likely. Cartilage repair is rarely a permanent fix to a knee problem (although it can last for many years), so recurrence of your friend's pain is not unusual.
I would be broadly disinclined to blame the physio for causing new knee pain; I would think it more likely that the damaged cartilage has got back to the level of damage where pain is felt, and possibly the degeneration may have been caused by this 'bent' knee joint. Post-op your friend should have been advised to exercise, including stretching. Do you know if they followed the advice given?