Targets of melee attacks can have a chance to parry each incoming frontal attack. Parried attacks are negated - no damage is dealt. It is a passive ability which does not require any action to be used. Most melee classes get this ability — warriors and paladins at level 10, hunters at level 8, rogues at level 12, Death Knights start with parry, and shamans gain the ability when they specialize into enhancement.
If a character or mob has a parry chance, it's always active and can take effect on every incoming frontal melee attack.
If applicable, the parry chance is added to the attackers attack table.
Originally, the only stat which increased the chance to parry was defense (0.04% per point). However, with the addition of Death Knights, 25% of their strength is added as parry rating (it is important to note that a Death Knight's high parry rating is one of their mitigation mechanics).
Some classes can increase their chance to parry with talents (either direct or via defense).
Similarly items can directly increase the chance to parry.
Attacks from the rear cannot be parried. Mobs sometimes do so anyway - this can be due to a bug or because they turn very quickly in place.
When a warrior's special attack is parried, he does not spend all the rage cost associated with that spell (even though the spell fails). Miss, dodge, or block events will consume the full rage cost when the spell fails. [citation needed]
Use: Attaches a chain to your weapon, reducing the duration of Disarm effects by 60% and increasing your Parry rating by 15. Does not stack with other similar effects.
Attaching an adamantite weapon chain causes the item to become soulbound.
Your chance to parry is based on the formula: % = 5% base chance + contribution from parry rating + contribution from talents + ((Defense skill - attacker's weapon skill) * 0.04)
Your Parry Rating is provided by items that have a Parry Rating bonus.
In combat, you will notice that your Parry percentage match what you see on your tooltips. Miss chance and Critical chance are unmodified by Parry, so you're not "wasting" Parries on misses nor are you able to Parry a Critical. This may seem odd to some folks if they are expecting a "if hit, then check if Parry, then check..." type system. WoW, like many other games, uses a combat results table-based combat scheme (where one roll determines outcome of an attack), so percentages are absolute. Your parsed Parry won't necessarily match your tooltip if you're fighting creatures higher or lower in level to you.
Notes
Prior to the Cataclysm expansion, a redesign of parries was contemplated, where a successful parry would cause the next two melee swings from the attacker to deal only 50% damage. This change was apparently never implemented. Instead, parry was reimplemented to provide the same avoidance as Dodge.
Prior to patch 4.0.1, a parry also reduced the "swing timer" of the defender, effectively giving the defender additional haste. This effect occurred both for characters and mobs, including most bosses.
Patches and hotfixes
Patch 4.0.1 (2010-10-12):(unofficial notes) Parries now provide the same mitigation as Dodge.
Patch 3.2.0 (2009-08-04): The amount of parry rating required per percentage of parry has been reduced by 8%. This is before diminishing returns. Combined with other changes, this makes dodge rating and parry rating equally potent before diminishing returns apply. Parry still diminishes more quickly than dodge.
Patch 2.1.0 (2007-05-22): Level 80 characters now gain 1% to their Parry Chance for every 49.18 points of Parry Rating, level 70 characters 1% per 23.65 points (from 31.54), and level 60 characters 1% per 15 points (from 20).
Patch 1.8.0 (2005-10-10): Minimum level for rogues to train this ability has been lowered to 12.
All creatures will now report a Parry on attacks from the front instead of translating them into a "Miss." Creatures will no longer be able to Parry attacks from behind.