knowone basically said it as best you can in as little words as possible. Im sure there is some landmark case decision where the reasoning by the judges will give you more details, but basically it gets first amendment protection because it's a satire. I thought I heard somewhere that George Lucas tried to sue a porn company that made a porn parody of Star Wars and he lost.
Ask Weird Al 'bout that...guy makes a fortune parodying music he doesn't have to write, or pay any fees for.
God Love him, Weird Al gives us joy and giggles; Coolio hated his parody "Amish Paradise" but was powerless to stop him.