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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).
A normal intelligence quotient (IQ) ranges from 85 to 115 (According to the Stanford-Binet scale). Only approximately 1% of the people in the world have an IQ of 135 or over. Genius or near-genius IQ is considered to start around 140 to 145. Less than 1/4 of 1 percent falls into this category. Around a century ago, it was a common practice to tag high IQ people with the genius label.