One of the reasons Plutarch is so useful is that he used earlier histories, many of which no longer survive, when writing his Lives. That said, he was writing biography, not history: his concern is with the individuals he is profiling and their place within events. His main purpose is to show how an individual's character affected his ultimate fate, and he usually ends each Life with a moral assessment of the subject. With respect to Plutarch writing 500 years (or longer) after the time of some of his subjects, generally the closer the subject was to Plutarch's own time, the more reliable the account. So for the biographies of the figures of the late Roman Republic (Caesar, Pompey, etc), for example, there would have been plenty of sources for Plutarch to use, some of which survive today, some of which do not. At the other end of the scale are his biographies of legendary figures like Romulus and Theseus, which probably contain little or no historical fact.

It should be stated that the tradition of biography in the ancient world wasn't quite as strictly factual as we would like to think. Specific details were often filled in entirely with whatever the biographer felt could have happened, or what the people might have said.

Another thing about Plutarch is that there are known inconsistencies even within the Parallel Lives. Christopher Pelling wrote an article called "Plutarch's Method of Work in the Roman Lives" that deals with this very issue. For example: Lucullus was likely written long before Cicero, Caesar, Pompey, Cato, and Crassus even though the figures themselves lived relatively near to one another chronologically. What is interesting is that Lucullus depicts events differently than they are shown in the other Lives that describe the same event. The theory is that Plutarch likely found a different source and incorporated that into the later Lives and left Lucullus unchanged.

There are suggestions that the Lives that take place in the Late Roman Republic used certain sources that no longer survive. Sallust's Histories is believed to have been used but it only survives today in fragments. Pollio wrote a history in the first century BCE that was used for by both Plutarch and Appian, but unfortunately that doesn't survive at all.

If you're interested in Plutarch I would highly recommend Pelling's work as well as the work done by Manuel Troster, C. P. Jones, and Simon Swain.