I think you mean the Spore ModAPI. The SporeAPI is something related with the Sporpedia.
The limits are what is documented. Right now not many things are documented, which limits the ModAPI to few more than just interacting with the Spore user interface. But we are still working on it, and future updates will expand the possibilities much more.
About how it is implemented, mods are packed into .dlls, which then the Spore ModAPI Launcher injects into the game.