I don't understand how I got this question correct??!! shouldn't both parameters 'bigger' && 'smaller' be relative

You're right, your code is kind of working by accident. I put a couple comments in your code below:

function max(bigger, smaller) { 
  var number = bigger > smaller; // you create a variable here (which will be a bool), but don't use it later.  So this line is irrelevant
  return smaller // after you return something, we exit the function.  Nothing below this line gets looked at.
  if (bigger > smaller) { 
    alert(bigger + "is larger than" + smaller); 
  } else { 
    alert("Something is wrong"); 
  } 
}

So the central problem is that we don't actually know which of the arguments will be bigger or smaller, we just know that two numbers will be passed in. You called your parameters bigger and smaller in that order, but it won't necessarily be so. It just happens that the treehouse challenge test case passed in two arguments that met your assumption, and I guess they're not using enough of a variety of test cases to check whether you've beat the challenge by accident like you have.

Here's a solution that might make more sense:

function max(num1, num2) {
  if (num1 > num2) {
    return num1; 
  } else if (num2 > num1) {
    return num2;  
  }
}