An application programming interface (API) is a type of programming language that allows applications to talk to one another. APIs are used to communicate with their application's operating systems or control units, and are what allow websites and applications to use services like Google Maps (for example when you see the Google Map of a shop's location embedded into the shop's website).
In short, they make the modern web go round. All social networking sites now rely heavily on APIs, and smart devices are using them non-stop.
They work by releasing some of a program's functions, which allows the application to share data and code autonomously, removing the need for programmers having to constantly babysit what data is shared.
Let's have an example - every time you sign into a third party application with your Facebook ID, that's in fact using APIs to negotiate the deal. Your favourite Farmville game is actually hosted on Zynga's own servers which then come through the pipe into the Facebook interface via an open door, and that open door is the API. To say APIs have totally revolutionised the way we use the Internet would be an understatement. Ever donated to a cause via a little Paypal button? APIs. Check out this extensive list just to get a taster on where APIs are. (Everywhere.)
How do businesses use APIs to their advantage?
Companies that offer their APIs freely to developers will see a notable increase in use of their services, and will see lower costs as they won't have to employ developers to manage the tools. A massive majority of all traffic to companies like Twitter and Facebook come through APIs and are an excellent channel to new customers and new markets. Apps are fuelled by APIs, and using combinations of apps and APIs, new experiences for end users can be made, thus making more business opportunities for you. Apps have become a vital channel for businesses now.
With the explosion of mobile devices and connected things which can just not be ignored, any company not using APIs is lagging behind.
API delivery expert Apigee sums APIs up perfectly: "Companies who want their brand and value proposition leveraged through apps understand that there is value in their internal systems and that they can and must participate in the app economy in the same way as they participated in the Web economy in the last decade."