If your disk is in expanding format, then it will expand when needed.
Parallels Desktop 7 for Mac User's Guide
Page: 166
When you create a virtual machine, the disk is created in the expanding format. You can change
the disk format in the Hard Disk pane of the Virtual Machine Configuration dialog. To add a plain
hard disk to your virtual machine, clear the Expanding disk option when adding a hard disk to the
virtual machine.
