Steven Poley has written a good discussion on this topic entitled, The Wrong Size Fonts.
The guidelines as far as I'm concerned boil down to: only use percentages for continuous media; body text should remain at the default user size (100%); and the smallest text should not be less than 85% of that default.
For the latter guideline, it's important to remember that percentages are cumulative. For example, consider a footer. You might choose to display its contents slightly smaller, so you apply
However, say that there's content within that footer that should be even smaller - perhaps a copyright notice. It should be at least 94.5% as 90% * 94.5% = 85.05%.