The shortcut key was obtained near the end of the Darkness of Hallowvale quest. With the shortcut key, the time to reach sector 3 from the start is cut to around a third. There are two shortcut doors which are identified by the symbol of the key on them.
The shortcut key could be placed on the steel key ring.
If you lost your shortcut key you could get another from Safalaan. Note that if the key was on your steel key ring when you lost it, then you could not get another key from Safalaan until you reclaim the ring.