The PWM built into the Arduino switches the port pin high/low at 500Hz, meaning that the period is 2ms or 2000us. Look at the green waveform in the simulation. Note that the current in the heater flows for 25% of 2000us or 500us or 0.5ms.
The Arduino code to get 25% duty cycle would be
analogWrite(pin, value), where value = 64. (I screwed up the explanation above. The value is only 8 bits; not 10 like I said above, so the max value is only 255 (not 1023), so you can have 256 different values from 0 to 255.)
64/256 is a duty cycle of 25%, meaning that since the PWM period is 2000us, the pin will be high for 500us...
63/256 is a duty cycle of 24.61%, so the pin will be high for 492.2us.
The smallest step is 2000us/256 = 7.81us.