Parry

A parry is ability that lets characters completely nullify attacks with a quick joystick motion upon being struck by an attack. Parrying in Street Fighter VERSUS works similarly to how it did in each of the the three Street Fighter III titles, but has a lot more limitations in this game and isn't exactly a thing you need to be a master of.

Similarly to blocking, attacks are classified as 'high', 'low' or 'mid' when it comes to how they must be parried. High attacks, when standing, must be parries by tapping forward upon the impact blow. Low attacks must be parried by tapping down. In the air, you simply need to press forward to parry regardless of how the attack hits; same thing with grounded mid attacks.

Parrying allows a player to quickly dodge an attack to deliver a very, very fast punish; with proper timing, a parry can easily ruin a hit confirm even if the opponent used, say, a light attack. It can also be used to give grapple-based characters and others of the type easy ways to get past pesky projectiles. Parrying in this game now has 8 frames of recovery, allow punishes even faster than before.

Limitations and Changes from Street Fighter III
There are some weaknesses. However, unlike in Street Fighter III, parrying straight out of blockstun (a 'red' parry) is no longer possible; you have to be in neutral state in order to parry attacks, which means you have to rely on an Alpha Counter or straight punishes to deliver pain after blocking attacks. Also, it is not possible to parry any throw attacks, including anti-air throws like Air Knee Smash and Soul Throw, and even some normal, but blockable 'grab' moves such as Alex's Back + Heavy Stunner Headbutt. It is also impossible to parry all Super Combos with a small list of exceptions, unlike in Street Fighter III.

Character Limits
Parrying is also not unlimited. Each character has a specific limit on how many parries they can perform in a match; this counter will carry over to later rounds. However, the parry count will only decrease every time you succesfully parry; failed parries are ok. The amount of parries you have availible is labeled right below the Stun meter.

In Tag Team games, the amount of parries is combined between the two characters and they share the same counter. For example, if you used a team of Dhalsim (who gets two parry opportunities) and Elena (who gets four) Dhalsim and Elena would share a 6-parry counter. Also, unlike in Single Match, you also regain two parry opportunities if you win a round and regain one if you lose a round.

Here is a table that informs of every character's amount of available parries:

Trivia

 * Originally, the characters who were present in the III games were supposed to be the only ones with parries similar to how Alpha game characters were supposed to be the only ones with Alpha Counters. Magmortar changed this because he thought these were huge advantages they'd be able to abuse on the rest of the cast. This element is sort of still there, in that characters from the III games tend to have more parries than an average character.
 * Originally, Dudley had 5 parries, C. Viper had 1, Zangief had 3 and Ryu had 4.
 * Cody's "Yoke" attack from Street Fighter Alpha 3 was an inspiration in making him a very high parry count character.