The encryption takes place on your computer. But recovery requires using a web interface and sending the password to BackBlaze so that the decryption can be done on BB's servers.
All my negatives I listed (and a few others) become positives for Arq Backup. But, as I said, many people love BB.
There are reports that unlimited is not really unlimited if you want to get into the 10s of TB. That is true of any personal/consumer backup product that offers unlimited.