Why does rsync nest directories?

rsync(1) is picky about the trailing slash. Try this:

rsync -avz /mnt/home/arek/ /home/arek

See the mainpage for all the details.

Update

If one of the paths is mounted via sshfs, I suggest using rsync(1) differently:

rsync -avzP -e ssh username@remotesystem:/home/arek/ /home/arek

(The -e ssh might be redundant at this point; rsync(1) used to default to rsh!)

The -P asks for partial file transfers to be restarted (very helpful on network links that might die) and shows progress (which is helpful over network links, since they are frequently slower than drive-to-drive copies).

Furthermore, rsync(1) is very clever about doing hashing checks on both endpoints when invoked this way -- disk to CPU bandwidth is much better than disk to ssh to network to ssh to wonky filesystem driver bandwidth -- so you will be transferring much less data across the network.

Consider: if you append a single byte to every file, rsync(1) over sshfs will be forced to transfer the contents of every single file from the source to the destination. rsync(1) over ssh(1) will instead start an rsync(1) on the remote endpoint and do the hashing computations on both machines as necessary, and will probably only transfer the last 8192 bytes of every file.