Why do some API providers require an API key?

Question

Several web service APIs have you sign up for an API key. For example, UPS Web services requires a key, which is included in calls to their service -- In addition to the use

Answer 1

In our situation, our clients want it for:

• Tracking/analytics - figuring out who's doing what and building what products. Because a number of users are desktop apps, just looking at referrers isn't always enough.
• Permissions - which resources should a user have access to? How can a user build apps that have access to specified resources?
• Licensing/legal - enforcing that users have read and accepted ToU/licensing information.
• Security - passing around usernames/passwords is a really bad idea.