I've always understood the age grading system to be a measure of your performance as a % of the age group world record, or a corrected performance equivalent to what you would have achieved in open athletics. This uses tables compiled and updated periodically by WMA.
However occassionally people will say "it's not exactly that" when you say it's a % of the world record. Is this because the tables get out of date, or some other reason? Cheers, Rob.