[scott_o]

It sounds like this was an automatic thing, the host could query the terminal and would get a response without any user input.

So that still leaves me with the question of why the key exists?

What use cases would you have for voluntarily sending the host your "identification"? Was this used for authentication?

[Animats]

It's for Telex service. You dialed up another Teletype machine to send a message to it. At startup, the other end was interrogated to print its answer-back on both Teletypes, to confirm that you'd reached the right destination. Then you could type to the other end, or send a paper tape and have it print or punch at the other end.