Is it more useful for your grade to tell you how much of the topic you know in relation to the other students in your class (C = the average grade) or for your grade to tell you how much of the topic you know (A = you understand everything that was taught, B = you understand most of what was taught, C = you understand some of what was taught...)
If you fit an entire class on a bell curve and give out 1 A, 2 B's, 4 C's, 2 D's and 1 F but the highest grade was actually a 32% would those grades be useful information? Sure, the A student knows more than the C student ... but none of the students really understand any of the material.
Edit: by "how much of the topic do you know" I actually mean "how much of what was taught of the topic do you know"
Ie, if the teacher taught you how to graph a linear equation and you can graph a linear equation, then you should get an A. If you can't graph a linear equation, you should get some grade less than an A. If nobody in the class can graph a linear equation, then what use is it to give an A to the person who can't graph a linear equation, but does it less wrong than everyone else?