I'm not certain but it could be used for album art, album description info and for last.fm scrobbling, according to the documentation.
Yes, that's why there's a Last.fm API key, but that and scrobbling work out of the box with the default key. So, is there any reason to replace it with a personal one?
I'm just guessing so your scrobbling can be associated with you. I can't think of any other reason right now.
Scrobbling's set up per-user using OAuth in the browser, which is better since different users can scrobble to different accounts.
I'm guessing it's left in because why remove it since it's working, and it would be useful if the default API key stopped working.
I think it has something to do with fetching album art.
I just set up a server and while it was scanning my library, the logs showed a bunch of rate limits for last.fm with a link how to increase it.
It's likely that Last.fm only allows so many requests using the default API and setting up a personal increases that limit.
I just noticed the same errors myself:
error="last.fm error(29): Rate Limit Exceeded - This application has made too many requests in a short period. If this is your API key, see https://www.last.fm/api/tos#4.4 for information about raising the limit."
Edit: Oh, and now I see you need to have your own in the latest version anyway:
BREAKING CHANGE: This release removes the Last.fm shared API-key, as previously announced here. If you use any Last.fm functionality (scrobbling, biographies, album descriptions), please check the documentation on how to create your own API Key, it is free and should only take you a couple of minutes. NOTE: Remember to re-enable scrobbling after changing the API Key and restarting the server.
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