What does "giving up one of your attacks" mean, exactly?
Whenever you take the full attack action, you can voluntarily choose to not make an attack. The attack you gave up can then be used to parry (with the same bonus).
Definitely cool for a crit-based class. Shame it doesn't work on undead, unless PF has significantly changed that... I recall something along those lines.
In Pathfinder, most things are vulnerable to critical hits and precision damage, including undead and constructs. The idea is that even though they don't have kidneys to stab, they still have structural weak points (like joints). The only creatures still immune are those with a uniform anatomy (oozes, elementals, plants, incorporeal undead, and so on).