It can be pretty complicated actually. The United States only have 2 large parties and it's the same in many countries with a Westminster system. We tend to have a first past the post system where the winner is the one with the most votes, even if it's just 25% of the votes. The name come from the horses race where the leading horse wins no matter how far away the others are behind.
This means that smaller parties have almost no chances to get elected in a single electoral district (or call it as you wish). In Canada, I think we have at least 11 parties in a particular district and most get almost no vote. That is why the legislatures are made mostly of two parties.
On the other hand, countries like Denmark, Sweden, Israel and many others, have a lot of parties elected. This is because they use a proportional system. Basically, each party is attributed a percentage of seats equal the percentage of votes. Most countries requires the parties to have a minimum percentage of the national vote to enter parliament. I think it's 4% in Sweden. Otherwise the seats are redistributed to the remaining parties.
Does the Knesset have enough parties for you ?
in this system, the Green party could get elected with 4% of the votes = 4% of the seats. In a first past the post system, you usually need around 10% of the national vote to get at least 1 seat. It is possible to get elected with less support but it's really rare.
The system really distort the votes to the point it could be qualified as non democratic by some.
How does it work with so many parties?
They form coalitions. In order to share the executive powers of the legislature, the parties of the coalition accept to make concessions temporarily to work with the others in order to keep the coalition alive. They can go as far as giving important ministry to the smaller partners of the coalition.
If it breaks, it's possible to form another one but if they can't, the parliament could be dissolved. It is possible to function without a coalition in a minority government but they usually don't last for very long. In Canada, the parties are required to vote on the annual budget. if the vote doesn't pass, it's election time. At any time, the parties can ask for a Vote of Confidence to take place. If the parliament doesn't have confidence in the executive (party with the most seats), it's election time. There is usually someone with the power to dissolve the parliament but it's a power that is rarely used. In Canada this power is in the hands of the Governor General and the Lieutenant governor in the provinces.
Now, trying to answer the question proper: each party need to have something different from the others. They need to be able to make the population understand why they deserve to be in the parliament. With over 50 parties, the main problem is how they got elected in the first place. The state would need to cover a very larger area and population.
They would obviously have general parties : right, centre, left, fascist and communist. But they would also have regional parties. From experience I can tell that regional parties are not really useful in a federal parliament but they are there anyway. In a galactic government, they might chose to divide the systems by regions or races to avoid mixing the local affairs with the more general matters of the galactic federation. It becomes impossible to have so many parties, so many people at the same place.
This is another important concept of modern democracies: it's not a direct democracy like it used to be in Athens. One person is elected to represent thousand or millions of people. Having so many people only make sense in China but it's not a democracy. Not yet...
