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Perhaps the quickest way to understand how the API works is to see some examples.  

The SixBit API Sample Application is a Visual Basic .Net application that provides an example of every API call.  In addition to providing a code example, the sample application can be used to make API calls to test XML or to retrieve data.

The Drop Folder Example contains several drop folder files and provides an example of using them to add and update data.  The example walks through the processing of each file and shows the results after each step.