Very basic.
Opening note : DONT RELY on eq to make your system sound good. Get the installation done well first.
Most headunits nowadays come with either a graphic, or a parametric equaliser.
Headunit Equalisers should be able to address basic weaknesses in your system that GOOD INSTALLATION cant address.
They should be used mostly to adjust the system to your personal taste. More bass? pump up those lows! more clarity? cut those lows a bit, tweak up the highs!
Headunits are generally limited, as far as eq's go...but anything more powerful requires a seperate unit, and not many beginners can afford to buy/spend time tuning these.
But the average person, really wont need anything but their headunit.
So whats the difference between graphic and parametric? Which is better, and which is better FOR YOU?
Graphic Equalisers
Graphic equalisers usually have more bands than your average parametric, but they are fixed at certain frequencies.
Say you had a 5-band graphic equaliser.
You could only set +/- db at the fixed frequencies, why may be like this...50/100/250/600/1.8k etc.
The advantage here is you dont have to worry about positioning the bands.
They are fixed at certain frequencies, you adjust the boost/cut to your taste. Listen, adjust again.
Fairly simple, usually fairly foolproof.
Heres an example of a graphical equaliser. See the fixed frequencies?

Parametric Eq's
A parametric eq usually, in headunit applications, has a few less bands (5 or 6)
Each band however, is not fixed. It has a range.
A 5 band parametric eq, for instance, lets you set 5 bands of equalisation, but you can put them pretty much where you want.
So, band 1, might be between 30-80 hz. You choose where the boosting/cutting is done.
You might set band 1 to 50hz, listen for a while, then tweak it up to 55hz. Or, if your sub lacks low-end "oomph"...tweak it down to about 40hz, and add a few dB down there.
Band 2 might be adjustable between 80-400hz. you can move it around how you wish. Etc etc.
This is very handy for eliminating things like sibiliance and "harshness" that may be present in your system at frequencies the graphic eq doesnt cover.
If you play a lot of mp3's for instance, you may want to boost the very high frequencies a little to get some clarity back.
Or if your system has slightly muffled midrange, because you chose to hide the speakers in the stock location for stealth, you can boost it a little.
You have more power, because you can adjust the frequencies to suit your particular system, rather than rely on the manufacturers best guess.
Another advantage of parametric eqs is you can change the "q" factor.
Basically, when you add/remove db at a fixed frequency, the "q" factor is how "Wide" a band is affected.
A narrow "q" for example, means if you chose 60hz, and boosted it plus 3db...then pretty much only 60hz would be boosted. Its a fairly straight cut.
A "wide"q, would mean that 60hz would be boosted 3db...then 50 and 70hz might be boosted 2....then 40 and 80hz might be boosted 1....it rolls off each direction.
This allows you to choose a "q" to suit your application. If your trying to boost a general area, but you want it roll off smoothly instead of making a particular frequency sound overly loud, you can. If however your really trying to cut out sibilance (hissing) at an exact frequency, you can set a narrow q and really cut it down without affecting the sound around it too much.
So, when you have a limited number of bands (as on most headunits) for eq, parametric offers you far greater flexibility.
It lets you choose where you want the band, how wide you want the band, whereas graphic eq's generally only let you control the amount of db cut/boost at a fixed frequency, for a fixed q.
The downfall of parametric eq's is, ironically, their complexity. They are powerful, because they let you fiddle with more options...but if you dont know how to use them, heres how complex just ONE band of a parametric eq can be.

if you dont have a general ear for frequencies, whats the point of having adjustable bands? If you know things sound a little boomy, or hissy, but dont know what frequencies you should be changing...you could make things worse with a parametric eq. A graphic eq might be the better choice here, because it usually offers more bands (although they are fixed) you can go from one fixed band to the next, gradually cutting/boosting each one and seeing if it does what your hoping. Easy, simple, much quicker.
Summary
So, Technically, Parametric is the most powerful and most flexible option, but a graphical eq (with 6 bands or more) *should* be able to help most people balance out minor issues with their system that the installation couldnt address. Or let them tweak to their personal taste.
I'll make the point again. DONT RELY on eq to make your system sound good. Get the installation done well first.
Sound deaden doors.
Angle your woofers
Play around with tweeter positions and choose what sounds best to you
Get the right size box for your sub.
And then EQ will be the icing on your cake.
If you have enough bands of graphic equalisation, either choice will serve well.
Why bother with a parametric eq for instance, if you have 100 bands of graphic..thats fairly comprehensive, and easier to tune using specialist tools..but i know of only one headunit offering anything near that many bands of graphical eq (From memory, some blaupunkt units offer a staggering number of graphical eq bands)...but again, if your going to be fiddling with that many bands of eq, you probably have researched the pro's, con's, and proper usage of eq's already. And have too much time on your hands.
So make a choice. What do you need, what can you use.
Consider where the bands on a graphical eq are, and how many there are.
Consider how useful a parametric will really be to *you*.
I should note, that if the graphical eq had less than about 12 bands, i personally would stand by my 5 band parametric eq all day.
Hope this helps. Any additional info/comments welcome.
If y'all disagree with some point, feel free to argue