The parables of Jesus are much loved by Christians, but frequently their purpose is misunderstood. In Jewish thinking, the word "parable" described a puzzle, riddle, or mystery. In the N.T. there are three main types of parable, which can normally be identified according to their original audience:
Parables of the Kingdom
These were originally told to the crowds of people who followed Jesus during his ministry in Galilee. They are often introduced with the words, “The kingdom of God is like ...”. In these, Jesus took a familar example from everyday life to illustrate a particular aspect of the kingdom of God. He then used a parable to reveal aspects of the true nature of the kingdom of God, to challenge the popular understanding of a political kingdom with a military Messiah centred in Jerusalem. Examples are the sower and the seed (Mark 4:1-9), and the wheat and the tares (Mt 13:24-30).
These parables were part of the wider mystery of Jesus and the Kingdom. Like the parables, the kingdom was a mystery to those outside whose hearts are hardened (the crowds and the Pharisees), so they do not understand the parables. But they were eventually understood by the disciples, whose hearts are not hardened (Mk 4:10-12). Jesus gave explanations to his disciples in private (Mk 4:13-20), in which each small detail is used to bring important teaching about the Kingdom. This causes these parables to appear to be rather like allegories (a story with a hidden meaning).
As we read these parables, we should think what this parable teaches us about the Kingdom, and what popular misconceptions of the kingdom does it challenge? These parables describe the radical nature of the Kingdom, and demand a personal response to Jesus and his call to follow him as committed disciples.
These parables are ficticious stories with a beginning, a plot and an ending. Jesus used this type of parable when speaking with the religious leaders, especially the Pharisees. They were used to stress one particular point and demanded a response from the hearer. They were not meant to be obscure or have deep hidden meanings, but were intended to expose the hard hearts and hypocrisy of the listeners. Details of the story are not normally very important. In a similar way to a modern joke, their purpose is to catch the listener out with the punch-line.
The original audience often understood them very well, and did not like it. In the Parable of the Vineyard (Lk 20), Jesus was talking to the chief priests and scribes and so the parable was addressed to them, and they knew it! (Lk 20:19). These parables are very clever, in that they cause the listener to identify with the character in the story, and then get caught out. An excellent example found in the Old Testament is the parable Nathan told David after he committed adultery with Bathsheba (1 Sam 12:1-6). David identified himself with the poor man and became emotionally involved in the story. He got caught out when Nathan showed him that he had actually behaved like the rich man in the story, and was successfully brought to repentance. In the Good Samaritan (Lk 10:25-37), the lawyer was trying to prove his obedience to the law, but could not accept that the hated Samaritan was the one acted as a true neighbour.
To understand these parables we need look at the beginning and ending to determine the original audience, and work out how they would identify with the characters in the story. Then we need to look for the unexpected turn to the story, and see how the listener gets caught out. These parables are not allegories, so there is not a deep spiritual significance in each detail. They make one main point, and demand a response from the listener. The temptation is to identify ourselves with the good character and use them to congratulate ourselves, rather than allowing them to challenge our attitudes.
These were mostly taught to the disciples, either to illustrate what Jesus was teaching them at the time, or to make a point on their own. Jesus used these to teach on prayer (the persistent widow & unrighteous judge - Lk 18:2-5), to teach on riches (the rich fool - Lk 12:16-21), or on the final judgement (the faithful steward - Lk 12:42-48). For us, these parables are not normally too difficult to understand.
There is a longer and more detailed article on How to Understand the Parables in the NT Studies section.