A mock API server is a simulated API server that provides realistic responses to the requests it receives from a client, typically used to stand in for a backend server that's still in development. Mock API servers can be used for development, testing, and external components, providing benefits such as removing dependency between frontend and backend teams, facilitating testing, and mocking out external dependencies. When creating a mock API server, best practices include supporting the same schema and interfaces as the actual API, mocking external dependencies, and simulating unexpected errors and slow performance. Various tools can be used to create mock API servers, including Mock Service Worker, Postman, and Mirage JS.