Lemon zest is nothing but grating the skin of the lemon. Care should be taking while doing this so that the inner white sheet from the skin does not peel away because it will be bitter. Lemon extract is like vanilla, almond extract which is in liquid form. I wouldn't say that it's compulsory but it definitely will give a nice flavor to the muffins. You may choose to use orange zest/extract instead of simply vanilla extract will be good too.