Yes, the wall switch is connected to a relay (or contactor) with 230V (or 120 V) coil and two NO contacts (lets call C1, C2). So your wall switch will no longer drive the lamp, but only the 230V coil.
These two contacts are driven by the wall switch, C1 is connected to the Arduino. On C1 you simply apply the 5V, then your board will know the position of the wall switch. The Arduino board can so drive an its own relay (5 or 12 V coil with darlington) that drive the lamp with its contact.
Basically is your boar that drive the relay and so you know if is ON or OFF.
The 230V relay was added to give the opportunity to drive the lamp also when the board is p owered off or is broken, and the second contact is used through an additional relay in NC wiring, so when the Arduino is powered on it will cut of that circuit.
Which is your real goal?
Regards,
Dario.