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Rate limiting is an essential feature for managing API traffic effectively on Azure. By implementing rate limiting, you can define and enforce a maximum number of requests that a client or application can make to your API within a specific time frame. This helps to prevent service overload by ensuring that no single client can exhaust the resources of your API, which could potentially lead to degraded service or outages.

Rate limiting is particularly crucial in high-traffic scenarios where multiple clients are accessing the same resources. It helps maintain a balance between resource availability and demand, ensuring fair usage among all clients and enhancing the overall stability and performance of your application.

The other options do not directly address API traffic management. Network security groups are used to control inbound and outbound traffic at the network level but do not limit the number of requests. Azure Firewall provides a way to secure your Azure resources by controlling traffic flows, but it does not perform rate limiting either. Resource Manager templates are utilized to define the infrastructure and services to be deployed in Azure but do not relate to managing API traffic. Therefore, enabling rate limiting is the most effective choice for managing API traffic and preventing service overload.