An environment is an operational location made up of hardware, software and network where an enterprise is able to deploy and operate software and control access to this software as required. Apigee supports multiple environments which you can use to mirror your internal product lifecycle. So you can design and develop APIs internally in a closed test environment and then move to a public production environment when the API is ready to share with your developer community.
An environment is created for you when Apigee sets up your organization. Each enterprise receives two environments by default, test and prod.
When you create an API you'll need to decide which environment you'll be working on. You can choose to create a new API on production, but that is not recommended as you may be exposing your API to developers before it's ready. However, if you're adding someone else's API that you won't be editing, you may want to just add directly to production so you can skip a deployment step. In general you want to start by creating an API in test and then deploy it to prod.
Note: Depending on your role, you may not be able to deploy to all environments. Users can only deploy to the test environment. If you're an administrator you can deploy to any environment.
As you work on your API, you'll be generating revisions. You can choose where to deploy those revisions. For instance, you can deploy a revision to production to allow developers to start working with your API and have a different revision on test where you're adding features or fine-tuning policies. Then, when you're ready, you can deploy the new revision to production overwriting the existing the revision on that environment. Using this method you can always have a live revision of your API available to developers while you're developing.