Arq retains backups in the same manner as Apple's Time Machine.
Arq automatically makes incremental backups every hour. It "de-duplicates" your files when it stores them in S3, so the same file contents are never stored more than once.
Arq saves the hourly backups for the past 24 hours, daily backups for the past month, and weekly backups until the amount of data stored in S3 reaches the budget you've set in the Preferences.
NOTE: Arq won't "thin" your backups (drop hourly backups older than 24 hours etc) if the Arq main window is open. It waits because you may be in the midst of browsing a backup that's scheduled to be dropped.