An API (Application Programming Interface) is a set of rules that lets one piece of software request data or actions from another, without knowing how it works internally. It defines what can be requested, in what form, and what comes back.
Example: when a weather app shows the temperature, it queries a data provider's API. When a website accepts a payment, it calls the API of a provider such as Stripe. The application does not need to know how those services are built.
On the web, most APIs run over HTTP. The most common styles are REST (resources reachable through URLs), GraphQL (the client asks for exactly the fields it needs) and gRPC (fast, mostly between internal services). An API can be internal to a company, open to partners or public, free or paid. It then becomes a product in its own right, with its documentation, versioning and quotas.
Why it matters when hiring
Almost every back-end developer consumes and exposes APIs; real skill shows in the design. In an interview, ask how the candidate handles versioning, errors, authentication and backward compatibility when clients depend on the API. If your API is a product you sell, look for someone who has already maintained a public API and its documentation.