Wikipedia gives us the following definition.

So it's a practice of purchasing a domain name, but not necessarily developing it into any product for the primary goal of reserving that domain for future use or to protect the trademark or the brand name.

In practice though, many parked domains point to simple web pages often called landing pages. These landing pages can show many different type of content. But for domain professionals and hobbysts, these landing pages can be broken down into the following types.

A parked domain can show a landing page with advertising items displayed on it. The purpose is to show the visitors of the parked domain these advertising items and usually when they click on any of them, the domain owner can earn money from these clicks.

You can of course create your own monetized landing pages, but this usually involves much more work (e.g. hosting your own page, design work, deployment). Usually, you will use parking services provided by companies who will automatically insert advertising items on behalf of the domain owner and then share the earned commission.

If the primary purpose is to sell the domain to someone else, possibly a better solution is to create a landing page where the visitor to the domain can directly contact the owner for possible purchase. In such case, you'll see a domain parked with a landing page which includes a simple form to contact the owner.

Selling domain name isn't an easy task. There is usually a lot of time and money invested to make sure that your domain name is seen by those who would be interested in it. While your domain is available for sale, you still have to pay for the yearly registration renewal fee. The cost of renewal varies of course, depending on the type of domain, but for those who have many domain names, this can add up rather quickly.

So a common strategy is to while making the domain name available for sale, you still try to generate some amount of income through that domain - usually via advertising. The goal here is to ensure that the domain can at least re-capture the yearly renewal fee, in which case you will be in the positive.