To set this up, some attacks require combos to use, if you’re combo is interrupted, then you are unable to use that move. So usually the most damaging move is the last one in some combos, but if you’re interrupted, you have to do the combo all over again. With Combo Offset however, you are able to continue the combo where you left off if you parry/counter your opponents follow-up to their interruption.
In most fighting games, you hold back on the control stick to block attacks. In some games you take no damage, while in others you take minimal damage. Regardless, you are able to block mostly everything except grabs and some super combos.
While this works functionally, it is ridiculous when you have characters shooting massive fire balls, or other magic attacks and you don’t take any (or much) damage just because your character was in a defensive stance. Same with when an opponent uses a weapon like a knife and stabs your character, but no, you held back so your character’s hand is in front of their face, thus no damage.