You are right, Ginger; N1 is compressor speed, and N2 turbine speed. That is with a free turbine, of course, where the two are not connected, and the turbine is driven by the hot gases from the combustion chamber.
100% is a speed decided upon by the engine manufacturer, and is not necessarily the maximum speed, merely a reference speed. Instead of a percentage, the gauge could be calibrated in RPM, but the former is more convenient to use. You should realise that all the limitations on engine speed are not limitations on the engine, but possibly on the gearbox. So, on a twin-engined helicopter, if an engine fails the other engine can then increase its power output to some extent.