Re: It's all relative / Everything's relative (to what?)
The example is more likely to be heard as a conversation between two people.
John: I think Sarah's really pretty.
Dave: Do you? I don't really think so. She's OK, I guess.
John: Well, it's all relative.
John would have been comparing Sarah to other girls he knows and Dave would have been doing the same, but it's unlikely that they know the exact same girls.
I'm interested to know something about some of your questions. You are a native English speaker and, while I understand your queries about British punctuation because you're American, I'm surprised by some of your questions about the meaning of phrases. Do people not use "It's all relative" in AmE and you're asking about its use in BrE?
Remember - correct capitalisation, punctuation and spacing make posts much easier to read.