Shadow Labyrinth Key opens the doorway to the instance Shadow Labyrinth.
Note that there have been reports of a bug preventing players from opening the Coffer when they defeat Talon King Ikiss too speedily. High level characters should attempt to prolong the fight to last at least one minute in order to ensure access to the Key.
Patch 2.3.0: "The Shadow Labyrinth Key can now be looted from the Talon King's Coffer next to Talon King Ikiss in the Sethekk Halls"
This key is only to open the south gate in Auchindoun towards the Shadow Labyrinth. It is not necessary to have the key in your possession to enter the instance gate.