The English definition of the word parsing is:
To break (a sentence) down into its component parts of speech with an explanation of the form, function, and syntactical relationship of each part.
In respect to SQL, when you execute a command it has to "parse" the text within that command. So it's basically taking your SQL statement, looking at all the words, making sure the syntax is correct and then constructs an
as a result of it's analysis/parsing of the statement.
An Introduction on How to Interpret Query