It doesn't. arXiv is exclusively a pre-print service. The ACM digital library is for peer-reviewed, published papers. All of the peer-review happens through the ACM, as well as the physical conferences where people present and publish their papers.
The peer review is all done by volunteers of conferences, not ACM.
Yes, and that peer review happens through the ACM. It serves an organizing function. The conferences themselves are also in-person events, and most of the important research papers come out of those conferences.