An API (Application Programming Interface) functions as a set of rules and protocols that allow different software applications to communicate with each other. It enables developers to integrate functionalities from one application into another, fostering innovation and flexibility in software development. For example, APIs facilitate the sharing of data and services between web applications, mobile apps, and cloud platforms, allowing developers to extend their applications without building everything from scratch. Additionally, APIs support scalability by enabling easier updates and modifications. Overall, they serve as essential building blocks in creating efficient and interconnected software solutions.