The art of Sushi: using wasabi to kill parasites

This is perfectly normal, however, I find the common claim that "it is to prevent parasites" a bit dubious (I would think that it would have to be uniformly applied to the entire fish to have any measurable effect). The wasabi is really there to add flavor. In really high-end sushi restaurants in Japan, for example, it is relatively uncommon for the guest to be served a mound of grated wasabi. Instead, the chef applies the perfect amount of wasabi to each piece of sushi. Some chefs will not even serve soy sauce, instead individually brushing on the sauce on each piece. If wasabi is served separately from the fish, it is generally also considered bad form to mix it with the soy sauce (as is commonly done in the US).

Edit: To answer your question about why you've never seen this practice before, here are some possible explanations:

1. It takes more time/skill/effort to do it properly.
2. Many sushi restaurants in the US do not have properly trained sushi chefs. In fact, in most areas of the country with little or no Japanese population, don't be surprised if your sushi chef is a Salvadorian who learned from the Oaxacan who learned from the Korean owner of the restaurant. Not that there's anything wrong with that; one of my favorite sushi places is run by an Indonesian. Just keep in mind that the people making you your sushi may have never experienced the "real thing" themselves.
3. "Real," fresh wasabi is very rare and expensive. Most of the stuff that is used in the US is basically horseradish paste plus food coloring. Restaurants that can both procure and afford to use the real stuff will want to use it sparingly; they wouldn't want to waste it by putting a mound of it on each plate. Therefore, they might be more inclined to use the "proper" technique.

Edit 2: Here is a video in which you can see famous chef Naomichi Yasuda using wasabi in the sushi. It all happens very quickly, but you can clearly see him dip into the bin of wasabi, rub it on the underside of the fish, and then apply the fish to the rice. Here is another video in which Anthony Bourdain explains the "rules" of high-end sushi eating, while dining at the super-famous and super-expensive Sukiyabashi Jiro (the proprietor of which is actually designated as a "living treasure" by the Japanese government). That second video shows the chef brushing on the soy sauce, and the general lack of both soy and wasabi on the plates.

The "parasites" claim is quite dubious, and probably mostly folklore, but there has been some published evidence that wasabi slows growth of certain bacteria, including e coli.

http://sciencelinks.jp/j-east/article/200210/000020021002A0124150.php has an abstract of one such study. I've heard the same claim from a book written in the late 80s, so I'm sure it's a widespread belief, but I don't know how long ago the research started. I'm fairly certain that the use of wasabi predates the belief and the research, however.

Most of the commercial wasabi contains a high percentage of mustard, which is the source of most people's sensation that wasabi is "spicy". Coincidentally, mustard is also associated with antibacterial properties. Having eaten a couple of decently-sized wasabi rhizomes in one sitting with fresh soba, I'd say "pungency" is the primary quality of fresh wasabi, and it's a different sensation than mustard. It has a very "clean" taste, which may reinforce people's impressions that it kills bad things.

As ESultanik pointed out, adding wasabi during preparation of the fish is done for flavor, but it has one other side benefit, though this may also be part folklore: The fish is more likely to stay attached to the rice with a dab of wasabi than without. I suspect if you noticed it it was probably sloppily applied, but if you haven't noticed it before, it's quite possible it was just used in sensible moderation.

Looking at several sources the general way to deal with most parasites is by freezing.

Here is some general information:

http://en.wikipedia.org/wiki/Sashimi

More details are here:

http://www.fda.gov/Food/GuidanceComplianceRegulatoryInformation/GuidanceDocuments/Seafood/FishandFisheriesProductsHazardsandControlsGuide/ucm091704.htm

The chef's claim is false: Usually, the only side where wasabi is applied is under the fish, so it doesn't slide off the rice.

It should be noted that 95% of wasabi used when serving sushi is not real wasabi, but mustard with green food coloring. True wasabi japonica, is one of the most expensive plant to cultivate and grow. And only real freshly grated wasabi, served in some high-end authentic sushi restaurants, is capable of killing some nematode parasites and bacteria.

Actually used to kill strains of bacteria. Most use it to kill ecoli on the preparation items