The Magpies' dip in form has seen them slip to within four points of the Premier League drop zone with today's opponents hoping to close that gap even further.
Mick McCarthy's side lie in 18th place, but a win at St James' Park would lift them closer to safety and put further pressure on the Tynesiders.
With a trip to Aston Villa followed by the visit of Manchester United in the coming weeks, defeat would turn up the heat on Newcastle in their bid to keep their top-flight status intact.
Pardew accepts a bad result would drag his side into the thick of the relegation battle, but insists his side don't need reminding that a defeat would be detrimental going into the final few weeks of the season.
"I think players understand what is an important game," he said.
"You cannot underplay a game like this. With 36 points with eight games left normally you would be fairly comfortable, but the fact that the third bottom team has 32 means there is more pressure on this game.
"We all understand the significance of this match but the pressure on the players is a healthy pressure. I have no problems telling them.
"The whole club knows how important this fixture is. We do not want to get dragged into any trouble. We have to pull ourselves away from it and these are the important games.
"The win at Birmingham gave us some breathing space and if we win this one it will do the same.
"It is vital. We do not want Wolves clawing any points back on us. You have to win your home games, it is as simple as that and it is important to do that in front of 50,000.''
He added: "Our position in the league will be determined by how strong we are at home for the rest of the season. After losing at Stoke, this match becomes so important.
"That will be hard against Wolves but it is what we will be trying to do. They have real momentum, although they have had a blow with Kevin Doyle getting injured.
"They have got a system that works well and Mick McCarthy gets the most out of them. They can compete against anyone so it is a tough game."
The return fixture at Molineux earlier in the season was a fiery affair, with 12 yellow cards dished out.
Joey Barton, in particular, was subject to several fierce challenges from Wolves.
But after watching a recording of the game back Pardew believes the Midlands side didn't overstep the mark.
"No, I have seen it and think they were competitive," the Magpies boss insisted.
"There were some committed challenges but whenever you play a Mick McCarthy side, you have got to expect them to be honest, focused and put you under pressure.
"They test your character. And when I watched the DVD of that game, I was impressed with the way Newcastle stood up to them that day. I thought they handled the situation very well.
"Joey had to deal with some very fierce challenges but there was no reaction from him and fair play to him.
"They were fierce but fair. All I saw on the DVD was honest passion on the pitch.
"That is what has to be there on Saturday. You cannot play a Premier League game and not expect a few lively tackles."
Pardew has already confirmed Stephen Ireland will not be available for today's game but he did reveal the midfielder was on a pay-as-you-play deal at the club.
The 24-year-old joined Newcastle on a half-season loan from Aston Villa in January but the deal between the clubs has been structured so that the Magpies only pay his wages when he plays.