The browser default size is 16px or thereabouts, depending on what the browser manufacturer set it to be. So IE's default size may be (probably is) different from Firefox which could be different from Safari and so on.
You can set the body tag to 100% or 1 em, but personally, I think that's too large. So I set the body tag to .8 em (don't ask me why, but I prefer em to %). Due to the "cascading" in cascading stylesheets, if I were to set the paragraph tag, for instance, to .8 em, then the resulting font size of paragraphs would be .64 em, because .8 (80%) of .8 is .64. So, I set my paragraph tag and similar level tags (div, ol, ul, blockquote, etc.) to 1.0 em, so the resulting font size of a paragraph would be .8 em ( .8 x 1 = .8 ). If I were to have a "note" paragraph and I wanted it to be slightly smaller than a normal paragraph, then I might set its value to .8 em. That doesn't mean it's the same size as the body tag (.8 em). That's where things can get a bit tricky with cascading stylesheets. Since p.note is a child of <p> and a grandchild of <body>, its actual font size will cascade down to a relative size of .64 em [.8 em (p.note) x 1.0 em (p) x .8 em (body) = .64 em]. Conversely, if you wanted the note paragraph to be bigger than a normal paragraph, you might set its font size to 1.2 em, so that it's about 20% larger than a normal paragraph. Heading tags in particular are often set to over 100% or over 1 em.
Quite frankly, just looking at numbers like that is very hard to judge what the resulting font sizes will be. So I do a lot of testing of the font sizes as I set up styles. That is, I build the output and look at it. I rarely go below .7 em on anything, and that's because I use Verdana. But you'll have to judge to see what works best for you and more importantly, your users.
BTW, if you have to worry about being 508-compliant, then you have to use relative font sizes for online output.
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