the sketch runs on the Atom side. It is located there : /sketch/
You should be able to see it running by entering the command ps | grep elf
Here is the output of the command on my Edison :
ps | grep elf
207 root 36208 S /sketch/sketch.elf /dev/pts/0
so the sketch is running on the Atom with the Linux Process ID 207
The only way to run a program on the MCU so far is to install the Eclipse SDK
It would make sense to run the Arduino sketch on the MCU side, since the Arduino boards are micro-controllers.