Small and handy, the paring knife is your mini Chef's knife used for those jobs where the Chef's knife is too big. You'll miss it if you don't have it.
There are some jobs where a smaller blade is called for. Peeling fruit, segmenting an orange, carving meat off a small chicken all involve an amount of "fiddliness" which although you could probably make do with a Chef's knife if you had to, it is just much nicer and safer to do with a smaller blade.
Paring knives are number two on our must have knife hit list, don't skip it. The handles on paring knives tend to be smaller than a normal knife (which annoyingly can make them look like chef's knives in some of the pictures, sorry about that) which means you can have a different grip on them. You hold paring knives like you would hold a pen knife or similar, the way that feels most natural (as opposed to a Chef or Santoku which you hold with a pinch grip).
Just because a paring knife is smaller in size does not mean they are any less sharp than any of the other knives. They hold the same edge and perform just as well.
We recommend the 4" inch paring knife as it is a good size, I find the 3" too small but feel free to experiment if you can to ensure you get the right one for you as we are all different after all.
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Read more about Styles of knife (that you will actually use).