The idea of parametric amplification first arose at much lower frequencies: AC circuits, including radio frequency and microwave frequency (in the earliest investigations, sound waves were also studied). In these applications, typically a strong pump signal (or "local oscillator") at frequency f passes through a circuit element whose parameters are modulated by the weak "signal" wave at frequency fs (for example, the signal might modulate the capacitance of a varactor diode). The result is that some of the energy of the local oscillator gets transferred to the signal frequency fs, as well as the difference ("idler") frequency f-fs. The term parametric amplifier is used because the parameters of the circuit are varied.

The optical case uses the same basic principle — transferring energy from a wave at the pump frequency to waves at the signal and idler frequencies — so it took the same name.