I understand what you mean, but I don't know if it increases over time.
Maybe if two people explain someone will understand better.
What 'GingerBreadMan' is saying is if he learnes the passive when he has 100 phy dmg it increases his phy dmg to 101 (1%). If he learnes it when he has 1000 phy dmg it will increase it to 1010 (still only 1%).
So, here's the question: If he learnes the passive when he has 100 phy dmg, increasing it to 101, will it increase while he levels up giving him a total of 10 extra points at 1000 phy dmg?
Get it?