What is an API? — Web Development Terminology
API is an acronym for Application Programming Interface.
Essentially, an API is a set of functionality exposed by a program or website to another program for use. API's are created so that different applications can communicate with one another.
What are API's good for anyway?
For example, say that I am in dire need of some shipping calculations. I plan on shipping with FedEx and I need to know how much a certain package may cost to ship. There are different rules and rates that apply to figure out how much a package costs. Sure you can call up fedex, describe your package and they will tell you how much it will be to ship; what if you are trying to process a lot of orders and want to automate shipping calculation?
In that case, you would use the FedEx Shipping Rate API. As long as your application knew the size and weight of the package along with the destination of the package, those values can be sent to the FedEx API to calculate shipping. The FedEx API will calculate your shipping cost and send the information back to the requesting program and there you have it, shipping cost calculated automatically.