It is in PArali Vaijnath Lord Vishnu successfully helped the Devas to obtain Amrit. Therefore, this place is also known as ‘Vaijayanti".
Once the Demon King Ravana went to Kailasa mountain and did a severe penance to please Lord Shankara. Put up with cold, heat, rains and fine and even then when Lord Shiva did not appear before him, he began to cut his head off in order to offer it to the ShivaLinga. Then the Lord appeared after Ravana tried to offer his tenth head. He restored all of Ravana's heads and granted him boons. Ravana expressed his desire to take Lord Shiva to Lanka as a boon. He said, "I want to take you to Lanka". Shankara, who is very soft hearted to His devotees, agreed to accompany Ravana to Lanka. He told Ravanan, "You must carry my Linga with care and devotion, but do be careful not to put it down on the earth until you reach your destination, or else, it will stay at whichever place you put it down" Shiva cautioned.Ravana began the journey homeward carrying the Shivaling. On the way, he wanted to relieve himself by urination. He bid a cowherd boy to hold the Linga while he relieved himself. The cowherd was not able to bear the weight of the Linga and when he could no longer hold it, he put it down on the earth. And the Shiva Linga put there stayed as Lord Shiva already ordained and came to be known as Vaidyanatheswar.
Here, the gods were sad about Ravana taking away Shiva to his Lanka. They requested saint Narada to do something. Narada met Ravana and said to him by way of praising his penance and Tapas. "You made a mistake in trusting Shiva. Believing Shiva's word was wrong. Go to him and slander him and get your way. Go to Kailasa and move it entirely. Your success will be gauged by your art of moving Kailasa from there". Ravana was tricked into believing Narada. Ravana promptly carried out Narada's bidding. Lord Shiva saw the ego driven mischieves rAvaNa and told him: "A unique power is soon going to born which will destroy your pride in the strength of your arms". Narada informed the Gods of these tidings and his success in his mission. The gods were relieved and were happy. In the meanwhile, Ravana too was happy with the boon he received from Lord Shiva. He returned and was in a trance and was under the influence of Shiva's mythical power. He was heady and drunk with power. He decided to conquer the entire universe. To subdue his ego only God had to descend on the earth in the Avatar of Rama.