Actually I read the digital version of this second edition, which, along with a remarkable library of other titles in Classics, is available free from the Center for Hellenic Studies. Greg Nagy's books are (all?) there: don't miss Comparative Studies in Greek and Indic Meter!
Anyway, Lord/Parry is one of those books I've imbibed the general idea of from references in other books (like Nagy's, or Watkins's How to Kill a Dragon). In short, oral epic composition is based on the use of "formulas" (meaning, generative templates that fit the meter). Observing and recording Yugoslavian epic singers at first hand, the authors believed they were witnessing the very same process that produced the Iliad and the Odyssey (and, Lord adds, many other European/Near Eastern epics from Gilgamesh to Beowulf). At the level of comparative poetics, what is most powerful is the argument that, through the mechanism of formula, composition and performance can be the same thing, that there is no "original" but instead the changing same of tradition which the individual singer both continues and authors anew each time.
I think this remains a very useful model of creativity to think with, and not only in the "oral epic" setting but anywhere generic creation might make use of a set of reusable templates. In fact I got to this digital text through a chain of links from a citation in discussions of (sigh) large language models, which, say people like Henry Farrell and Cosma Shalizi, might be thought of as models of "tradition" in the specific sense described here. I guess the idea is that training the big model is like finding the mnemonic units of the internet-tradition. However, I'm pretty skeptical of that particular connection. It's clear that for Lord, the compositional act is governed by higher-level abstractions ("themes" and even "myths") as well as by the particulars of the social situation of the performers—how they acquire tradition, how they perform it, to whom.
I found the opening chapters most compelling, and it was fun to get a glimpse into those Yugoslavian epics (quotations are given in original and translation—and digitizations of the field recordings are included!). There are even pages with Bartók's transcription of the singing and accompaniment.
The later, comparative chapters, including two long ones on Homer, are kind of a letdown, at least to me. They revert to what sound to me like late-Victorian speculations about how it "must" have been for the great Homer to dictate his songs. Then there are Golden-Bough-esque assumptions about the kernel of "myth": that the "return song" is deeply about the "revived god." That just sounds silly. Still, I'm very glad I read it for the first three chapters alone.