A Parley is a discussion of terms for the cessation of hostility between the commanders. Unlike creation or dissolution of alliances, which is the domain of Rulers, these talks can be done by a Commander independently of his Ruler, though still under the auspices of Duty, Loyalty, and Obedience.
When Commanders of two or more unallied sides inhabit the same hex, rather than initiating a combat (or even after combat has been initiated) they may order their units to cease hostilities. From this position of non-aggression, a Commander may call for parley. Alternatively, parley can be done via Thinkagram or across hex boundaries.
A Commander ordered to fight to the death could not take part in a parley (unless he had low loyalty and duty). But, without consulting his Ruler, a Commander could take his force out of a contested hex he had been ordered to defend, give up a ransom, or even surrender, if he thought it in his Ruler or side's best interest.
Parson violated the rules of Parley by agreeing to meet with Ansom, and then having Bogroll assassinate him, indicating that they might be more guidelines than rules. Similarly, Queen Bea had her Chief Warlord K.C. assassinate the decrypted Princess Cruz.