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It compares people of the same age or age category and assumes that IQ is normally distributed, that the average (mean) is 100 and that the standard deviation is something like 15 (IQ tests sometimes differ in their standard deviations).
The average person's IQ is 100. On most tests, a score between 85 and 115, with the median deviation, indicates average intelligence. Even though humans have shown a pattern of rising 3 IQ points per decade, the scale is set so that the average is 100.