How do you handle parents who coach from the stands.

Let them know before the season even starts that it's not acceptable. Things like that are communicated via required pre-season meeting and parent letters. Here are more ways to handle issues with parents:
http://www.breakthroughbasketball.com/coaching/dealing-with-parents.html

Jeff is spot on here!

Have pre season meetings and cover every aspect of your program, including the expectations of players and parents.

A written agenda explaining all of this is a great way of doing this... that way they cant say you didn't tell them or they didn't hear it.

Be friendly and be open to questions, but be firm with your programs philosophies.

One of the things that I told my players was very simple... NO ONE in the stands puts you in games, thats my job and mine alone. Pretty simple and to the point.

Already been said, but dealing with it up front in your preseason coaching philosophy is the best bet. If you're currently in the thick of things, a short e-mail should do the trick depending upon the parent who is "coaching" during the games.

Parents need to understand how important it is for the kids to have one voice while on the court. I honestly don't think they realize how distracting it can be for a kid on the court to hear different instructions being yelled out. If you put it in terms of a sandlot game, no one is yelling instructions every few seconds, the kids just play. And no one is there giving them advice before or after the game either. It's tough, but parents just need to let their kids play.

I've run into three major types over the years:
A) the parent who gets caught up in the excitement of the game, hears everyone else yelling and yells
B) the parent who wants their kid to play well, so they constantly offer suggestions on/off the court
C) the parent who thinks they see things the coach can't see on the court

If I run into a B or C, articles like the one below sometimes help.

http://www.thepostgame.com/blog/more-family-fun/201202/what-makes-nightmare-sports-parent