Function calling with OpenAI API simplifies the process of structuring human language inputs into data that can be used to call external APIs with strict parameters. This method is perfect for ensuring consistent, structured data output, which is essential when dealing with external APIs that require specific information. The video demonstrates how to set up a Node.js project, install necessary packages, and create an OpenAI instance. It explains the basic chat completion API and introduces function calling to achieve more reliable results. The tutorial also covers the use of SERP API to get real-time results from Google Shopping API, showcasing how to turn user prompts into structured data, call an external API, and then convert the API response back into natural language for the user. This approach is valuable for developers looking to integrate AI capabilities into their applications efficiently.