How does this biasing work with the two 100 ohm resistors and the 5V to create only positive voltages?
R3 and R4 form a voltage divider across the Arduino's 5 volt supply.  The point between R3 and R4 will be 2.5 volts. (Incidently, the 100 Ohm values shown make a very heavy load on the Arduino 5 volt regulator - I'd probably use 10K for those resistors.)

Since the bottom terminal of the transformer is connected to that 2.5 volt point, the junction of R1 and R2 will vary around that 2.5 volt potential.

The two 100 Ohm resistors would draw 25 mA from the Arduino's power supply, which may be an excessive load for the arduino's 5 volt regulator. Increasing the resistors to 1K would reduce the draw to 2.5 mA, and 10K would reduce it to .25 mA. If the signal is going into a 100 Megohm load, the current drawn from the divider is insignificant, even with 10K resistors (although I'd add an 0.1 uF capacitor between the 2.5 volt point and Ground, just to remove any transient variations.)