The Paroli Staking Plan works on the simplistic principle of maintaining a Base Stake (1 Unit) which you drop back to when you lose, but to which you add one more Unit to the Base Stake if you win. You continue to increase the stakes when winning until such time as you decide to pocket the winnings and revert to the Base Stake (or go home).
To a certain extent the Paroli can be considered as the inverse of the "Martingale Staking Plan", because you increase the stake only after a win, not after a loss. In fact, much like the Grand Martingale, the Paroli too has a variation where the increase in the stake is more than the value of the Base Stake; presumably that particular variation can therefore be called "The Grand Paroli"!
With the Paroli too, you need to know when to bail out and take the winnings. This means that you must understand the statistics that rule the game well in order to appreciate the Odds (and Probabilities) properly. Your betting plan needs to encompass how far you are prepared to let the winnings build up before you take the profit and revert to the Base Stake, and how much to raise after each win. This obviously depends on the type of game being played, the Odds being offered and the Probabilities attaching to each bet.
It is claimed by some that the advantage of the Paroli over such staking plans as the Martingale is that you don't require a large bankroll; you simply let the profits run and cut short any losses, whereas you don't have that sort of control with the Martingale Staking Plan. However, that is not strictly correct, because the standard version of play requires you to add more to your winnings to make up the next stake. A widely used variation of the Paroli therefore is to pocket the winnings each time while increasing the stakes on each subsequent bet after a win.
In general, most people lose in the long run using the Paroli Staking Plan, primarily because greed cuts in at some point and over-rules the principles of sensible staking and sound money management. So, in effect, the real problem with both the Parlay and Paroli Staking Plans will come if you fail to keep proper track of your losses and become totally unaware that Lady Luck has left not just your side but the entire building!