API testing is essential for identifying bugs and errors in software, focusing on security, performance, and functional accuracy before market release. The process involves creating a testing environment and conducting various types of tests, including contract, performance, component, and security tests, to ensure the functionality and safety of APIs. A structured strategy, like Martin Fowler's testing pyramid, is recommended for effective API testing, and expert guidance from professional testing companies such as ImpactQA can enhance the testing approach.