Most studies have shown that parrots know what they say. This is because, with proper training, they can discern a particular set of words for given occasions.
A study by scientist Pepperberg on the famous parrot, Alex, revealed that parrots could discern abstract concepts like numbers, size, colors, and material.
Parrots can easily use words depending on the context. They use distinct local dialect for different occasions. This is understood to be as a result of their natural habitat where they use a different set of words in case of danger, while interacting, or for food.
Parrots are most likely to respond to terms that are familiar to them while ignoring languages they don’t understand. Though, they learn the language of a new environment after some time to help them fit in.
Parrots also use language depending on their emotional state. A happy parrot tends to talk more, while a scared one tends to remain silent and withdrawn.