You have hardware and software. In order to make things easier for developers to use the hardware there is a layer that sits between the games and the hardware that takes instructions from the game and turns it into video and sound.
This is the API, it is a set of instructions that can be used to draw what you see on your screen or hear through your speakers. It effectively means a developer doesn't have to tell the console hardware how to draw each pixel, they can send it an instruction to draw a triangle at a certain position and what to fill it with in very simple terms. It can do this for many more complex graphical effects too. Directx is an example of API, OpenGL is another. As Directx has been in use in Windows since 1995 it has by and large driven games development.
I hope that makes some sense, it doesn't cover all the nuances but gives you an idea of what they mean when talking about API's.
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