This comes from the Excel Help file (Excel 2002/XP)
PERCENTILE
Returns the k-th percentile of values in a range. You can use this function to establish a threshold of acceptance. For example, you can decide to examine candidates who score above the 90th percentile.
Syntax
PERCENTILE(array,k)
Array is the array or range of data that defines relative standing.
K is the percentile value in the range 0..1, inclusive.
Remarks
If array is empty or contains more than 8,191 data points, PERCENTILE returns the #NUM! error value.
If k is nonnumeric, PERCENTILE returns the #VALUE! error value.
If k is < 0 or if k > 1, PERCENTILE returns the #NUM! error value.
If k is not a multiple of 1/(n - 1), PERCENTILE interpolates to determine the value at the k-th percentile.
It seems to cover what I thought to be the most important question, which is that Excel will interpolate over gaps. IIRC, the interpolation is performed on a straight-line basis between the two adjacent points, confirmed, I think, by this quick test:
A B C D
1 1 0% 1 =PERCENTILE($A$1:$A$6,B1)
2 2 20% 2 =PERCENTILE($A$1:$A$6,B2)
3 3 40% 3 =PERCENTILE($A$1:$A$6,B3)
4 4 60% 4 =PERCENTILE($A$1:$A$6,B4)
5 5 80% 5 =PERCENTILE($A$1:$A$6,B5)
6 6 100% 6 =PERCENTILE($A$1:$A$6,B6)
7
8 10% 1.5 =PERCENTILE($A$1:$A$6,B8)
9 11% 1.55 =PERCENTILE($A$1:$A$6,B9)
10 12% 1.6 =PERCENTILE($A$1:$A$6,B10)