SQL Server query optimiser is a cost based optimiser, which
means that is tried to come up with a low cost execution plan for each SQL
statement. Each execution plan has associate cost in term of the amount of
computing resource used. The query optimiser analyses the entire possible plan
and chooses one of the lowest estimated cost plans. Some time a complex SELECT
statement has thousands of possible plans in that case optimiser will not
compile the entire possible plan instead it tried to find an execution plan
that has a cost reasonably close to the theoretical cost.
Parsing process just convert statement into system understandable format, after that Algebrizer validate the statement and make sure that referenced object , column do exists and the statement is valid to process the data. Then algebrized expression tree will compiled by the query optimiser. After that execution plan generated, it is placed in cache and then execute.
