The keyboard is not working in your virtual machine.
That might occur if the Parallels Desktop application is installed into your user home directory and FileVault is turned on in System Preferences
on the Mac OS side.
For the keyboard to work when FileVault is enabled, please do the following in the Mac OS:
Go to System Preferences -> Universal Access (Accessibility in OS X 10.8.x) -> Seeing;
Check the box next to "Enable access for assistive devices";
Quit Parallels Desktop if it is running;
Start Parallels Desktop.
For the same reason as above some key combinations like "CMD+TAB"
may not work in your Parallels Desktop 5.0 virtual machine. See article #8635