The percentile of a candidate is the number of people the candidate is ahead of in the list. Percentile is calculated based on the performance of the candidate in a test as compared with others. For example if your rank is one in a group of 100 students your percentile is 99% because you are ahead of 99 students (or 99% of students) who appeared in the test along with you.
Percentile = (number of people behind you/total number of people) x 100
In the above example your rank is one among 100 students. The number of people behind you is 99. So the calculation is 99/100 x 100 = 99 th percentile
Percentile system is most common and prevalent in competitive exams and is a more relevant admission parameter than the percentage of marks you scored in the exam.