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In this video, Rashid explains the Zip Code Validation API. He mentions that most APIs for this purpose are premium and costly, but he found a free API that works well. This free API provides the same results as premium ones, validating zip codes and giving information such as state, country, and city. The API is open source and supports multiple countries, making it easy to integrate. It provides results like postal code, country, state abbreviation, etc., which are essential for zip code validation.