Taking off 500kcals is also one way to do it, but it doesn't take into account that larger people can run a higher deficit and then once you go down to your lower weight, 500kcals may be too large a deficit to be practical. As a result using a % allows bigger deficits to start, dropping slowly down to smaller deficits near the end.
e.g. someone weighing 300lbs might have a TDEE of 2500 kcals per day. They can drop 500 cals and go to 2000 easily, and still be eating enough food to get all their vitamins and minerals etc.
BUT someone who weighs 140lbs, might have a TDEE of 1500. If they drop 500kcals they are down into very low calorie territory. However, if they drop 10-20% they are running at 1200-1350 cals. Which is better for long term sustainable loss.
The issue with large deficits used over a long time is that your body will not like them. Bodies are 'designed' to hate change (even the change that makes them healthier) and have several machanisms to try and push you back to wherever you started. e.g. You won't be hungry for the first few weeks but sooner or later the body tends to fight back. It will 'turn up' the hormones that make you hungry so that even a manky old biscuit left out on the side for 2 days starts to look good 
. The willpower that is so easy in the firs few weeks becomes harder and harder, your mind obsesses about food because it is evolutionarily programmed to do what it takes to force you to prioritise and seek out food when it thinks you are losing too much weight.It won't care that the loss is healthy, it will only care that it is different to wat came before.
Your body will also start to economise to the new low calorie amounts. Things it would spend calories doing when calories were plentiful, it will stop doing. Things like heat production, damage repair will be slower, hair growth will slow, etc. It will turn down your energy levels so that you move less and conserve more. It will reduce what it is using every day to try and balance out with what is available.
That happens even at a higher calories amount (smaller deficit).
Weight loss slows or stalls and suddenly you find yourself hungrier than ever but for smaller results.
If you started with a higher calorie amount you always reserve the option to drop your cals down a little bit again. e.g. If you were eating 1400 cals a day and losing, you can go down to 1300 cals when loss stalls.
BUT if you start right out the gate on 850 then you cannot drop lower. You are stuck with a body that tries hard to only burn 850 cals a day rather than the 1600 you started out burning.
Plus, unless you are being extraordinaly careful about how you spend your 850 cals it is hard to get all the vitamins, minerals, etc your body needs in such a low volume off food.
Such a low amount also never allows you to normalise habits that will keep the weight off. Habits are the key to long term success so i you don't develop them now, they won't be there when you need them to maintain your loss, and so instead you are likely to go back to whatever habits caused the gain in the first place.
Anyway, I'm not trying to tell you that you are doing the "wrong" thing because we all must find our own way. Just what caused me to stop wasting time cutting hard and instead look at what it takes to lose weight in a way that it stays gone, rather than fights to come back.