Parity occurs when a "mistake" is made in the reduction phase and the cube is reduced to a state (say C*) which cannot be solved using 4x4 outer layer moves as there is no way for those operations to transform the state from C*->C. Thus they must be transformed using wide moves or slice moves.
In more basic terms, there are 2 2-swaps (1 of wings and 1 of centres for OLL IIRC and 2 of wings for PLL) which can only be changed using a parity algorithm.