Interesting question. So glad you asked.
See, the thing about children is that a) we always compare them to other children, and b) we know we should NEVER compare them to other children.
Well, yes, as a matter of fact it is.
I never want someone to compare my children to hers... unless my children come out on top. Yeah, it may not be something you hear every parent say out loud, but it is what drives our hearts. Many of us have a physiological reaction to hearing anything negative about our children coming out of anyone else's mouth.
So, how do i know if my children are keeping up with their peers? Well, i honestly don't. I find myself in various situations over the course of the year: children at my house playing with my children demonstrating various levels of proficiency in various topics; children in public places behaving in various ways; and parents of our local homeschooling groups discussing things they are currently working on with their offspring. All of these scenarios illustrate 3 things: my children aren't doing half the stuff other children are doing; my children are right on par with what other children their ages are doing; and my children are way ahead of their peers.
Basically, since we don't test yet (elementary school is about proficiency and mastery, not keeping up with an arbitrary state-determined standard), i have only these random situations throughout the year to 'measure' my kids against their peers. And since my kids come out ahead, on par, and behind when compared to their peers, i have to say we're probably in the same boat as every other parent out there: comparing our children to their peers to feel some sense of satisfaction that we are doing what we should be doing.
One thing i can say about my children: they are far more compassionate than many of their peers, and that is a side effect of parental interaction. It is also much more possible when children are not overwhelmed with academics at too young an age.