Moved to the "Website design" folder, because it isn't a PHP issue.
There are three types of URL referencing - absolute, relative and root. I think you're trying to choose between relative and root, not absolute.
Absolute - the full and complete URL for the resource, as it would appear in the address bar or a link from an external site, eg http://website.com/folder/file. You should use this whenever you are linking to external sites, or giving links that could be taken off-site, but there's no need to use them for internal links most of the time. (Note that different subdomains will count as 'external' for this purpose)
Relative - historically the most common form of internal linking, this is relative to the position of the current file. This is often the easiest and shortest way to give a URL, although in complex hierarchical structures it can get confusing.
Root - a link along the lines of /folder/file, with a / at the beginning, is always parsed relative to the domain root. This is useful when you have resources such as stylesheets and images that are stored in a single folder and shared across the whole site – much easier to remember that it's /images/arrow.png than using relative references and trying to remember how many folders deep you are. It's also common in any menu that is included (such as by SSI or PHP), because the menu needs to give the same results no matter what folder the file that is calling it is located in.