Sie arbeitet in einem Heim.

It can be either:

• she
• formal you

That is because Sie is capitalized. However, at the beginning of a sentence, sie would be capitalized anyway, so the form alone does not tell you which one it is.

The verb arbeitet fits both:

• sie arbeitet = she works
• Sie arbeitet = you work (formal)

So you need context to know which meaning is intended.

Because the verb has been conjugated to match the subject.

The infinitive is arbeiten = to work.

Its present-tense forms are:

• ich arbeite
• du arbeitest
• er/sie/es arbeitet
• wir arbeiten
• ihr arbeitet
• sie/Sie arbeiten

Actually, note something important here: for formal Sie, the verb is usually arbeiten, not arbeitet.

So in this sentence:

• Sie arbeitet can only mean she works

If the sentence meant formal you work, it would be:

• Sie arbeiten in einem Heim.

So the verb form helps remove the ambiguity.

Because in is a two-way preposition in German. That means it can take:

• dative for location
• accusative for movement/direction

Here, the sentence describes where she works, so it is a location, not movement.

So German uses the dative:

• in einem Heim = in a home / in a care facility / in an institution

Compare:

• Sie arbeitet in einem Heim. = She works in a home.
• Sie geht in ein Heim. = She goes into a home.

Because Heim is a neuter noun:

• das Heim

After in with a location meaning, you need the dative.
The dative singular form of ein for a neuter noun is einem.

So:

• nominative: ein Heim
• accusative: ein Heim
• dative: einem Heim

That is why you get:

• in einem Heim

Heim is neuter:

• das Heim

That matters because it affects the article and other word endings, such as:

• ein Heim
• in einem Heim
• das Heim
• im Heim = in dem Heim

Heim often means some kind of home, residence, or care institution, but it is usually not the ordinary everyday word for someone’s private house or home.

Depending on context, it can mean things like:

• a care home
• a nursing home
• a children’s home
• a residential facility
• an institutional home

So Heim often sounds more institutional than English home.

If you want to talk about someone being at home in the everyday sense, German usually says:

• zu Hause

These words are related, but they are not interchangeable.

• das Haus = house, the building
• zu Hause = at home, in the everyday personal sense
• das Heim = home/residence/institution, often more formal or institutional

Examples:

• Sie ist zu Hause. = She is at home.
• Das Haus ist groß. = The house is big.
• Er lebt in einem Heim. = He lives in a residential home / institution.

So in your sentence, Heim suggests a workplace such as a care facility or similar institution.

Yes, if you mean in the home or in the facility, referring to a specific one.

• in einem Heim = in a home
• im Heim = in the home

Here, im is a contraction of:

• in dem

So:

• Sie arbeitet in einem Heim. = She works in a home.
• Sie arbeitet im Heim. = She works in the home / at the facility.

No, this is a very standard German main clause:

• Sie = subject
• arbeitet = finite verb
• in einem Heim = prepositional phrase

German main clauses normally put the conjugated verb in second position:

• Sie arbeitet in einem Heim.

You can move another element to the front for emphasis, but then the verb still stays second:

• In einem Heim arbeitet sie.

That version is possible, but less neutral.

Because this is a main clause. In German main clauses, the conjugated verb usually comes in second position.

Verb-at-the-end order happens in other structures, especially subordinate clauses:

• Ich weiß, dass sie in einem Heim arbeitet.
  = I know that she works in a home.

So:

• main clause: Sie arbeitet in einem Heim.
• subordinate clause: ..., dass sie in einem Heim arbeitet.

Usually it means she works there in the general sense: that is her job or workplace.

German present tense often covers both:

• a general fact
• something happening now

So without extra context, Sie arbeitet in einem Heim is normally understood as:

• She works in a care home / residential facility.

If you wanted to emphasize that she is working there right now, context or extra words would usually make that clearer.