To test Twilio applications effectively, it's recommended to use Twilio test credentials instead of making real requests. Test credentials allow you to send fake requests with predictable results and are 100% free. To get started, install a Python application that sends SMS, create a .env file with your Twilio account SID, auth token, from numbers, and to numbers, then run the application using Flask. The application can be tested by changing the account SID and auth token in the .env file to test credentials, which will allow it to send fake requests without incurring charges. By selecting combinations of sender and receiver magic numbers, all possible outcomes can be generated, making it easier to test error conditions and ensure that the application is robust.