This is an issue on the host's computer (the person attempting to host a game). Below are the things that can cause it.
AMD: Something is wrong with the graphics drivers
Update the host computer's drivers directly from AMD's site, avoiding any automatic updates or Device Manager. You should get the latest Recommended (WHQL) drivers.
AMD: Use H.265
In case the host and client support H.265, the people joining should try turning on H.265 in Parsec's settings before joining.
HDR is active
Parsec doesn't support HDR. If the host computer has it turned on, turn it off by going to the Display Settings > Windows HD Color > Play HDR games and apps.
You're using the experimental 10-bit color
If 10-bit Color is activated on the client machine, keep in mind some hosts may have trouble using this experimental feature. Try turning it off and connecting to the host again.
The resolution is too high
If the host computer's resolution is higher than its graphics card can encode, then the resolution needs to be lowered. AMD's encoder is especially known for this. Try altering your resolution to something lower like 1280x720. See how to alter the resolution on Parsec.