Parity bits are used to detect single bit errors during data transmission. There are two common types of parity - even and odd. Even parity means the total number of 1s in the transmitted bits including the parity bit should be even. Odd parity means the total should be odd. The receiving device calculates parity and compares it to the received parity bit to check for errors. While parity can detect single bit errors, it cannot detect errors if an even number of bits are corrupted.