Advantages over MQTT
The ESPHome native API has many advantages over using MQTT for communication with Home Automation software (currently only Home Assistant). But MQTT is a great protocol and will never be removed. Features of native API (vs. MQTT):
Much more efficient: ESPHome encodes all messages in a highly optimized format with protocol buffers - for example binary sensor state messages are about 1/10 of the size.
One-click configuration: ESPHome just needs one click to set up in Home Assistant - no more messing around with retained MQTT discovery messages and alike.
One less single point of failure: In the ESPHome native API each ESP is its own server. With MQTT, when the broker shuts off nothing can communicate anymore.
Stability: Since ESPHome has far more control over the protocol than with MQTT, it’s really easy for us to roll out stability improvements.
Low Latency: The native API is optimized for very low latency, usually this is only a couple of milliseconds and far less than can be noticed by the eye.