I am constantly seeing players talking about using a third party program to track how much damage you do.

I seen in the user agreement that third party software is illegal but players are saying otherwise in fleet chat can i get some clarification?

You're perfectly fine with parsing software. BW probably use them for their nerfs.

Not that BW really bother with much in the way of enforcement anyway.

I might even have evidence of people using 3rd party software to talk to each other instead of using ingame chat.

What they mean with illegal 3rd party software in the TOS is software that messes with the game, from automatisation that goes beyond the "1 ingame action per key press" rule, over cheat software that modifies the game's internet traffic for teleporting, moving faster, or causing a convenient lag spike in PVP, to hacks that actually try to manipulate your character data to give you credits or items.

What Parsec and Starparse do is processing SWTOR's combat log. It's just another program running in the background using a file that is generated by the game for this very purpose. Showing the results live to you and other players isn't any different to using teamspeak or even just playing youtube music in the background.

That said, most of the time when someone tells you to use parsing software in a pug, it's because they want to stroke their own epeen or know whom to kick in case of a wipe. Content that requires parsing also requires a group of well-coordinated players that know each other, calmly discuss tactics after a wipe, and whom you would trust if they told you that parsing is legal.

I am constantly seeing players talking about using a third party program to track how much damage you do.

I seen in the user agreement that third party software is illegal but players are saying otherwise in fleet chat can i get some clarification?

Let's see the EULA:

It is also strictly prohibited to use any third-party software or any other device with a view to modifying the Software in any way, intercepting or scanning Game traffic or communications, changing the way the Game plays or playing in an abnormal manner or in a way that could impair the correct operation of the Game.

Now, what the damage tracker does is, you ask swtor to log your conbat, and the program reads it, get numbers from it, and display them. That's all. So it is perfectly ok. It helps you know where you are in the number game, but for most content you don't have to play it unless you want to. For example you should have a rough sense of whether you are struggling with story contents (big problem) or not contributing much in flashpoints. Besides, the number does't reflect you skill; I got pretty good gear, which let me report decent numbers on the dummy, but when on the ground I still have a long way to go (esp. in pvp >_<)