Yes, it is all about natural language parsing, but I think the most interesting feat was actually the seeding of Watson's database. Millions of documents (books, wikipedia, scholarly articles) were "fed" into Watson which become it's knowledge base. So to me, it's not so impressive that Watson understand the questions, but is able to utilize human knowledge that is in a natural-language form.
I agree, it's not an attack on humanity. The PBS Nova episode about Watson explores the issues rather thoroughly, but the videos on IBM's site go into the technicalities a little better. The NOVA ep does do a good job of comparing Watson to competing AI programs out there, though.
I find it exciting that a Watson-like program will eventually be able to answer technical questions for people (like doctors) who don't have time to scan through the thousands of scholarly articles of latest research -- you know, applying Watson's capabilities to a realm that humans need help in.
How long will it be before IBM puts up an "ask Watson" web page, I wonder?