The Bandwidth Limit setting (sometimes called bitrate) tells the most Parsec can use of the host and guests' internet speed. Higher bandwidth means higher video quality, but pushing it farther than the host and guests' connection is able to handle can cause lag due to congestion. To be safe and avoid issues, you want to use a bit less than what everyone can handle.
The bandwidth is evenly divided between guests, meaning if 2 guests are connected with a Bandwidth Limit of 20Mbps, each one gets up to 10Mbps. The host sends the full amount in upload, and guests receive it in download.
Especially if you're playing with strangers, it isn't really viable to keep asking all guests for their download speed, and dynamically switch the bandwidth usage every time someone joins. Instead, you can go for a sensible 10Mbps per guest, which makes for fairly ok quality at 1080p resolution. Make sure to test your internet speed and use at least 5Mbps less than your upload speed as a host. If you want to try higher quality, increase the amount of Mbps per guest.
You can lower the bandwidth limit further if guests are having stream issues, but keep in mind that stream issues can also be unrelated to bandwidth, and may be a more general connection issue with them, or you. If one person or another has an issue, it’s probably best to just ignore it and let that person move to a different game. If everyone joining seems to have issues, learn to troubleshoot lag and latency issues.
If you're playing with friends, you and they can test the internet speed to find out a good amount of bandwidth to use. Suppose this example:
In this case, Guest B has the lowest download speed. If Guest B was the only person joining, the bandwidth limit should be set to 10. You should subtract 5Mbps from their speed because this avoids using up all of Guest B's internet speed with Parsec.
Because there are two guests, you can double that to 20 instead, which still falls under the Host's upload speed, and under Guest A's download speed.
If you keep seeing lag/stutters with the stream, even with a theoretically fine bandwidth limit, you should lower it further. If issues continue after lowering it, it means there's something going on with the connection which is unrelated to this setting. Learn to troubleshoot lag and latency issues.