APIs, or Application Programming Interfaces, serve as intermediaries that enable different software applications to communicate and share data with each other. They define a set of rules and protocols that specify how software components should interact. APIs play a crucial role in modern software development by allowing developers to integrate third-party services, access databases, and enhance functionality without needing to build everything from scratch. This leads to increased efficiency, creativity, and collaboration in building applications, ultimately fostering a more interconnected software ecosystem.