. is interpreted by the CLIENT in relative URLs and by the SERVER in
absolute URLs. That is, if you say
in a document whose base is "http://myserver/foo/bar.html", this is a
interpreted as "http://myserver/baz.html". However, if you say
this is an absolute URL and the ".." gets sent to the server, which
can interpret it however it wants.
The relative URL document
is up for 'last call' before becoming a proposed standard RFC. Check