As applications and software continue to be developed, they go through various updates. And, we all know that Zoho pours tons of money into R&D, continually improving their software.
So, when developers get to the point that they have significantly enhanced the API, the actions one can take, or added many new endpoints, they may add an entirely new version. Everything is explained clearly explained in more detail in this cool article we found.
Developers need to be true to their customers and not simply pull the rug out from under everyone who is using the former version of the API, so they release updates in versions, while still maintaining the integrity of the prior version.
It is best practice, and probably most helpful, to always use the latest version of the API. You will notice that different applications have different versions (Workdrive is on Version 1 while CRM is on Version 3).