This is an issue on the host's PC. Below are the things that can cause it.
The is the most common issue. If your GPU is not supported, none of these solutions will help you, and you will require a new GPU or PC to be able to host. If your GPU is supported, continue on below.
Intel HD Graphics Driver September 2019
An Intel Graphics driver released in September ending in .7XXX (for example 18.104.22.16862) has a bug preventing Parsec hosting from working. Please check device manager to see if you have this driver. If this driver is installed on your system, you will need to update your driver (here).
Ensure your graphics card drivers are up to date through one of the following methods;
Nvidia: Install the latest drivers from Nvidia's website, or through GeForce Experience
AMD: Install the latest Recommended drivers from AMD's website. Do not install "Optional" drivers.
Intel: Install the latest drivers from Intel's website manually, by searching for your CPU or graphics on their website. Do not use the automatic tool.
Windows' Device Manager: Device Manager may not always provide you with the latest drivers, please use the method above that applies to your graphics card.
This is a limitation of some AMD APUs. You can try lowering the resolution of the stream in your hosting settings to 1280x800 or lower (not through Parsec; do it directly through Windows' settings).
Disable/close NVIDIA Shadowplay, Xbox DVR / Game bar, VNC or other game streaming apps and, then see if that fixed it.
Nvidia Shadowplay is an option in GeForce Experience marked "Share". If you do not have GeForce Experience, this does not apply to you. If you do not have the Share option, please re-check that your GPU is supported and update your drivers.
Xbox DVR is an option in the Windows settings app under the "Gaming" category, in "Captures". it is marked "Background recording".
Cloud machines purchased from other providers
You're either attempting to use a instance type that doesn't include GPU/hardware encoder support, or your GPU drivers are not correctly installed.