The Etsy API allows developers access to Etsy's marketplace of 500,000 sellers and 8.5 million handmade listings through RESTful APIs using JSON and OAuth. The API provides features for searching listings by color, keyword, and location, getting personalized recommendations, accessing sales data, creating and editing listings, and getting real-time updates. Developers can sign up on the Etsy developer website and Etsy can help promote applications built using the API.