This ia a fairly common situation in other countries, but it really bothers the British Parties, because it means that they cannot CONTROL Parliament by themselves. Whilst a Parliament is intended to be a "talking shop" where matters are discussed, the British have never liked free discussion, but prefer to have a single Party control the Legislature, (and also the local Councils, incidentally).
A hung Parliament means that no single Party can enforce its wishes, thus only Non-Contentious issues can be passed, and the Administration has less possibility of getting its own way.
In each Parliament, it is the MP's who will (effectively) decide who will form the Executive. Normally, the majority party are the Government, because they instruct their members how to vote, and can, therefore, outvote any other Party.
Before the new Parliament is opened, the Queen will ask one of the Party leaders, if they can form a Government; usually, it will be the majority Party leader,(for the reason given above) but if there was no clear single majority Party, she will act on advice from the elected Party leaders, or her own advisers.
Where the majority is so small, it means that tactics may decide on which Laws are passed. Very few MP's will be able to stay away from the house, or go home early at the weekends, in case a vote is called on the off chance of having it passed! One sick member was brought from hospital into the Lower House on a stretcher, and carried through the voting lobby when this occurred some years ago! It means that all members have to spend more time tied to the House, and that is something that they really do not like!