Chapter 1: Hero Creation of True20 Rulebook:
Some backgrounds—such as gnomes and halflings—involve races smaller than humans. Such small heroes get a +1 to their Combat bonus due to their size (they’re small targets, while normal-sized targets seem big to them), and a +4 bonus on Stealth checks. (...) See Size in Chapter Eight for more on the effects of relative size on characters."
Size is described in Chapter 8: Adversaries of the True20 rulebook:
Larger creatures are easier to notice and hit relative to smaller ones, while smaller creatures are harder to notice and hit. Apply the combat modifier for the creature’s size to its attack rolls and Defense. These modifiers cancel out for creatures of the same size, who attack and defend normally against each other."
Therefore, Size bonus is applied both to attacks and to defenses (Parry and Dodge).