As with any language, mathematics is allowed to use the same word for different notions.
One sense of "parameter" (the second in the question) is that of "characteristic" or perhaps "ingredient"; a value that helps describe or define an object. Like how the parameters of a debate define the scope of topics that can be discussed. So, parameters can include the radius and/or center of a circle, the aspect ratio of a rectangle, the $x$- and $y$-intercepts of a line. The "Earliest Known Uses of Some of the Words of Mathematics" pages mention that "parameter" was first used in 1631 specifically for the latus rectum of a conic.
The "parametric equation" sense of "parameter" is that of "other measurement", in particular with regard to graphing curves and surfaces. (See this ancient answer of mine to the question "What is a the intuition behind a parametric equation?".) Sticking with curves ... While we often graph by expressing $y$ in terms of $x$, or $x$ in terms of $y$, there are significant advantages (beyond the scope of discussion here) to expressing both $x$ and $y$ in terms of something else ---an "other measurement", or parameter--- that helps convey a graph as a path of travel. Whereas the cartesian equation $x^2+y^2=1$ for the unit circle is perfectly effective at defining a static set of points, the parametric forms $(\cos t,\sin t)$ and $\left(\frac{1-t^2}{1+t^2},\frac{2t}{1+t^2}\right)$ describe (very) different dynamic journeys along the curve.
So, the $a$ in $x^2+y^2=a^2$ and the $t$ in $(t,t^2)$ are both parameters, but in different senses of the word. (Attempts to fashion a single meaning to the term that covers both use cases are a bit strained.)
Consequently, we have the situation that $(a\cos t, b\sin t)$ uses the parameter $t$ to traverse an elliptical path defined by parameters (namely, semi-axes) $a$ and $b$. Language is funny like that sometimes. (See "Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo".)
As to whether $(x,\pm \sqrt{x})$ can be considered a parametric representation of parabola $x=y^2$ ...
It's a not-unreasonable representation of the parabola, in the same way as one writes $y=\pm\sqrt{x}$. It tells you something about the points on the curve. So, fine.
However, $(x,\pm\sqrt{x})$ doesn't describe a path of travel along the curve; rather, at each $x$, an ostensible traveler either chooses between candidate $y$-values, or somehow visits both of them simultaneously. That defeats the purpose of describing a path. A proper "parametric representation" doesn't give a choice; the value of the parameter should tell you exactly where you are. Formally: the $x$ and $y$ coordinates should be functions of the parameter.