it spawns in the party space Mazza'la Gala. It is used to unlock the keyed door in the same party space, pften known as the "Smooching Room."
Edit: Lost by 15 seconds!
Ah ha! So THAT's what that key is for! I've had one in my inventory for ages and didn't know what it opens; or rather I forgot what it opened! Thanks for refreshing my memory!