Well say that you are in a class of 90 people, and you graduate top 5 percent. So let's say you're 4th out of 90. That means you leave 86 people behind you. However, if you are in a class of 500 people, and let's say you ranked 49th, this means you did better than 451 people on the same curriculum.
I mean it's all relative ofcourse but for me this looks a lot more impressive.
In my view, Oxford is looking for people at the top of their respective universities (although in reality there are other factors, particularly for people who left their student lives behind many years ago). In your scenario, coming 4th out of 90 means that only 3 people were 'better than you'. Coming 49th out of 500 means that 48 people were 'better than you'. For a degree that sees applicants from hundreds of universities across many countries, I just feel intuitively that coming top in this sense is the best position to be in. Put it this way, if all people in the top 5% of the class with 90 students applied to Oxford, they could realistically all get offers. If, on the other hand, all people in the top 5% of the class with 500 students applied to Oxford, I don't think they would be in the position to allocate over 1/3 of their spaces to these students.