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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).
IQ scores range from one to over 200 with the average score being 100, as of 2014. Sixty-eight percent of all IQ scores are within one standard deviation of the average. This means that most people have an IQ score between 85 and 115.