Parallel talk is when you describe what the child is doing, or touching, or hearing, etc. You do this with young infants all the way up to preschoolers. You are modeling language, vocabulary and it shows that you are taking a genuine interest in what the child is doing. So if you are sitting with a toddler who is doing art it may sound like this:" I see you chose the chubby brush. It is making a wide line on your paper. Look how you are moving it around and around like a spiral! You're putting the brush back? Which one will you choose next?"
Or if you are with an infant on his belly trying to reach a ball it may sound like this: "You see the ball? You are trying really hard to reach it. Your arm is stretched all the way out. Now you are scooting a little closer. Yeah, you got it! You are grabbing it."
That was a good question, I hope this helps and I am looking forward to what others will say about it.