APIs (Application Programming Interfaces) are significant in connecting different software applications by providing a standardized communication framework. They allow systems to exchange data and functionalities securely, enabling developers to use external services or integrate various platforms effectively. Through APIs, applications can extend their capabilities by leveraging third-party features, such as payment processing or social media integration, without needing to build these functionalities from scratch. This modular approach accelerates development and fosters innovation, ultimately enhancing the overall ecosystem of software solutions.