Entropy-regularized optimal transport, which has strong links to the Schrödinger bridge problem in statistical mechanics, enjoys a variety of applications from trajectory inference to generative modeling. A major driver of renewed interest in this problem is the recent development of fast matrix-scaling algorithms\textemdash known as iterative proportional fitting or the Sinkhorn algorithm\textemdash for entropic optimal transport, which have favorable complexity over traditional approaches to the unregularized problem. Here, we take a perspective on this algorithm rooted in the thermodynamic origins of Schrödinger's problem and inspired by the modern geometric theory of diffusion: is the Sinkhorn flow (viewed in continuous-time as a mirror descent by recent results) the gradient flow of entropy in a formal Riemannian geometry? We answer this question affirmatively, finding a nonlocal Wasserstein gradient structure in the dynamics of its free marginal. This offers a physical interpretation of the Sinkhorn flow as the stochastic dynamics of a particle with law evolving by the nonlocal diffusion of a chemical potential. Simultaneously, it brings a standard suite of functional inequalities characterizing Markov diffusion processes to bear upon its geometry and convergence. We prove an entropy-energy (de Bruijn) identity, a Poincaré inequality, and a Bakry-Émery-type condition under which a logarithmic Sobolev inequality (LSI) holds and implies exponential convergence of the Sinkhorn flow in entropy. We lastly discuss computational applications such as stopping heuristics and latent-space design criteria leveraging the LSI and, returning to the physical interpretation, the possibility of natural systems whose relaxation to equilibrium inherently solves entropic optimal transport or Schrödinger bridge problems.