The Cage Key is used and found in Sen's Fortress. Unlocks the cage Big Hat Logan is locked in and another further along that contains a Soul of a Hero. Also used to gain access to the Cage Lift at the top of Sen's Fortress.
The Cage Key is guarded by a Serpant Mage, which can be seen from the area where you control the direction of the boulders.
To reach it however, you need to go almost all the way to the top of the Fortress until you reach the area where a Giant throws Firebombs at you.
Near here is a walkway with a chunk knocked out of it. Dash-Jump across this gap (Forward + Circle, then tap Circle again), then all the way down this isolated tower to locate the key.