Yes, the sine wave gets stored in a BRAM and continuously played back.
In code you can see there is an entity called sip_fmc150.vhd, the data from the host comes in on two signals for the first dac
dac0_in_dval : in std_logic;
dac0_in_data : in std_logic_vector(63 downto 0);
That goes into an entity called dac3283_wfm.vhd, "Wave Form Memory". Once it is saved using commands you can play it back continuously, that is what the reference app does.
All this can be simulated and makes it easier to understand how everything is working, the CID documentation says
From the Tcl Console (View -> Panels -> Tcl Console) run the following command:
source ../../simulate/isim/isim.tcl
Then you can simulate and trace the data around. My suggestion is to do everything in steps.
1) Simulate the design as provided and get a basic understand how it is working.
2) Match the frequencies of the DAC and ADC and make sure it is still working.
3) Connect the ADC to the DAC and again confirm those changes are working
4) Synthesize
There are many reasons why things might not be working and simulating is an easy to see what is happening. For example there is an dac3283_phy.vhd entity that accepts data to send to the DAC. There is an ads62p49_phy entity that receives data coming from the ADC. In simulation you can see what type of data is going in and out and that is what you need to get to match.