Do colleges know if we're in the top 10% of our class even if my school doesn't rank?

California high schools periodically submit the courses and grades of their top students to UC. UC then recalculates GPAs (by the usual UC method) to find the threshold GPA for the top 9%. When you apply, your UC calculated GPA is then compared with the threshold GPA set by a recent past class of your high school. This determines whether you have Eligibility in Local Context (meaning that you are likely to get admitted to UC Merced if you get shut out of other UCs that you apply to).

Note that your class rank as calculated by your high school does not determine whether you are in the top 9% for UC purposes. You are also not competing with your current classmates, since you are just trying to reach a threshold GPA set by a recent past class from your high school.

http://admission.universityofcalifornia.edu/counselors/q-and-a/local/#2
http://admission.universityofcalifornia.edu/freshman/california-residents/local-path/