Not the key. A spare (and mated) SKS fob. Inside the SKS fob is a keylet that unlocks the door, and some people attach that to a hidden exterior location. The reason? If for some reason your SKS gets lost or stolen, or you switch drivers and your co-pilot walks away with your SKS...etc, your G3 becomes, or will become a 3200 pound stationary object until it's reunited with a (mated) fob. Not a big deal for people who don't travel a lot, or who've never had a purse stolen, etc...
To prevent you from being locked out of the car. In the old days, you just hid a spare key somewhere outside the car. But since that would allow anyone to open the door and start the car without some sort of Faraday-type shielding, they are talking about hiding the mechanical key outside the car, and then removing the battery from the fob and putting that inside the car. Use the mechanical key to open the car, then use the battery-less fob to start the car. Of course, you can just wrap foil around the fob inside the car, or outside the car and accomplish the same thing. But removing the battery gives you one extra layer of defense since most people don't know how to use a battery-less fob to start the car, assuming they smash a window, or find your mechanical key and fob. Since I never take my keys out of my pocket, I usually don't lose them. There are not enough keys to set off the magnatron when I enter my office building, I use a badge swipe to open my office door, a garage door opener to get in the house...
In case you need to find your spare key at night Be sure to tie a flashlight in some place easier to find.
I secured my spare door key by using a small square of self-stick velcro to attach it to the underside of the passenger side windshield wiper arm. It stays protected from the weather, and is invisible to everybody. As an extra security measure I put a paper clip through the end of the key and clipped it to a wire inside the wiper arm (just in case the velcro fails, I won't lose the key entirely!
EDIT-- OOPS, that post was from a year ago. This new forum design really hides the posting date. Both fobs have a small removable metal key. This is used if your coin battery is dead on the fob, to unlock the door. Then you hold the fob up against the Start button, so the car can sense the fob's code without needing a working battery in the fob. (The car can energize the fob enough to work at this short distance, even with no battery in the fob.) So, you lost your ($300!) fob, and want to drive back home: Get your spare metal key from under the bumper or other hiding spot. Open the door with the key in the door's keyhole. But the car still won't start with just the metal key. Find the hidden fob inside the car. (Which has the battery removed, so it'll last more than a couple of years hidden away.) Hold the spare fob up to the Start button. Press Start. Drive! ~~~~~~~~~~~~~~~~~~~~~~~ I don't want to lose my fob--they are expensive ($300) to replace! So I have one of these fob covers, which is bright red. The grippy rubber keeps it from falling out of my pocket. And I have a piece of paper with my phone number slipped inside. See this post for details.
I only use one key, so I keep the spare in the house, in a ziplock bag with the case opened and the battery removed (wrapped in paper). The battery will last for many years this way. So I just tried starting the Prius without the battery in the fob. It's easy. When the fob is within an inch or so of the Start button, the dash display shows a box with this message: Depress brake pedal, and push power switch to start. It started right up. And it powers off without needing the fob again.
I keep a copy of the physical key in my wallet, the odds of me losing both at the same time are pretty slim
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Ok, the Fob is dead. But it will still start the car by holding it to the start button. Will it do that indefinitely? No harm?
Theoretically, it should do it indefinitely with no harm done. The Gen III and later did away with the slot for the key fob to fit in, therefore the system backup when the key fob battery failed was to allow the chip to be read by the Prius by simply holding the key fob in close proximity to the start button. Gen II could read the key fob by inserting the fob into the slot on the dash even if the battery was dead. On base model Gen II (non SKS units) one had to insert the fob into the slot to be able to enter "Ready" mode by pushing the power button on the dash.