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Parallel worlds exist in two different dimensions. These worlds are both fundamentally the same (same land, same geometry, etc) but have something that sets them apart. The most common example of parallel worlds are the light and dark worlds. The player usually starts off in the light world and then gets teleported to the dark world. This world is usually evil and more dangerous than the light world.
The player can usually switch at will between the light and dark world. Parallel worlds may serve as a way to solve puzzles. For example, a fallen tree in the dark world is blocking your way. Switch to the light world where the tree hasn't fallen then back to the dark world. Of course these puzzles get alot more complicated then that.