the apparent displacement of an observed object due to a change in the position of the observer.
In other words, seeing something differently because you've changed positions.
Parallax originally didn't have anything to do with the fear entity, that came years later with Johns's retcon: GL Rebirth.
The name meant that Hal didn't like the what the Universe looked, so from his new position of immense power, he decided to change so it would fit his view of how it should be.
It's just coincidence (and lucky for Johns) that Parallax sounds a lot like paralyze (what you feel when you're really frightened) so he ran with it.