An API is a specification that allows software components to communicate with each other. APIs can be classified based on the abstraction they describe, such as operating systems, programming languages, applications, and infrastructure services. REST architecture uses nouns and verbs for readability and less bandwidth than SOAP. When building APIs on AWS, developers can use services like Elastic Beanstalk for deployment, CloudWatch for monitoring, and IAM for security. It is important to focus on security at all stages of developing and deploying APIs.