Does arduino run AC or DC? Based on my small knowledge on the crystal in an arduino, it seems like AC makes sense. True? No?
As a general rule, any modern electronic device with computational ability has to use DC. The reason is that they use specific voltage levels to indicate binary/logical states (i.e. 0's and 1's).
In theory, an ideal DC supply (Direct Current) should provide a constant voltage. That allows the circuit to effectively turn it on an off to represent binary states. (In reality, there's no such thing as truly "off" though, because voltage is relative.)
However, the voltage from an AC supply (Alternating Current) is constantly varying. If you plot it on a chart, you should see a nice sine wave, flowing smoothly between positive and negative several times per second. Hypothetically, if a digital circuit tried to use AC then it would get very confused, because everything would seem to be turning on and off all the time.
With all that said, it's very common to turn AC into DC through a process called rectification. For example, that's what allows DC devices to get power from an AC outlet (e.g. to run your computer or charge your phone).
All digital logic circuits run on DC.
Most Arduino boards include a voltage regulator. You can feed them an input ranging from 7 to 12 volts, and they "clean up" that input and lock it to precisely 5 volts, the voltage needed by the Arduino.
They can also run directly off the regulated 5 volts from the USB connector.
Have a look at this: http://arduino.cc/en/uploads/Main/arduino-uno-schematic.pdf and try and have a guess.
I don't want to be nasty, but have you at least googled this? Google: "Arduino Power Source" and the first hit is http://playground.arduino.cc/Learning/WhatAdapter
It runs from USB as well as from an external power source.
To answer your question: DC