<type name="Magento\Webapi\Controller\Rest">
    <arguments>
        <argument name="request" xsi:type="object">
            Magento\Framework\Webapi\Rest\Request\Proxy
        </argument>
        <argument name="response" xsi:type="object">
            Magento\Framework\Webapi\Rest\Response\Proxy
        </argument>
        <argument name="router" xsi:type="object">
            Magento\Webapi\Controller\Rest\Router\Proxy
        </argument>
        <argument name="oauthHelper" xsi:type="object">
            Magento\Framework\Oauth\Helper\Request\Proxy
        </argument>
    </arguments>
</type>

This is a type configuration.

This configuration is for the webapi_rest area. This is the area that corresponds with the REST Api sub-application.

This configuration tells the Object Manager that when a user wants a Magento\Webapi\Controller\Rest object that the following arguments should be used in the foo object's constructor.

• $request = new Magento\Framework\Webapi\Rest\Request\Proxy (...)
• $response = new Magento\Framework\Webapi\Rest\Response\Proxy (...)
• $router = new Magento\Webapi\Controller\Rest\Router\Proxy (...)
• $oauthHelper = new Magento\Framework\Oauth\Helper\Request\Proxy (...)

<preference for="Magento\Framework\App\FrontControllerInterface"
            type="Magento\Webapi\Controller\Rest"></preference>

This is a preference configuration.

This configuration is for the webapi_rest area. This is the area that corresponds with the REST Api sub-application.

This preference configuration tells the Object Manager when a user wants a Magento\Framework\App\FrontControllerInterface object that it should return a Magento\Webapi\Controller\Rest object.