The Lookup API can be used to determine the line type of a phone number, which can help filter out landline numbers before sending SMS messages and potentially saving money on messaging costs. By using the Line Type Intelligence package provided by Twilio, developers can access information such as carrier and line type data for a given phone number. The example code demonstrates how to use the Lookup API in Node.js to check the line type of a specific phone number and filter out landlines before sending an SMS message. This approach can be useful for applications that need to send messages to a large number of users, such as marketing campaigns or appointment reminders, to ensure that only mobile numbers are targeted. Additionally, using the Lookup API can help optimize messaging costs by identifying undeliverable messages and preventing unnecessary charges.