A masterkey is a key that unlocks all doors. In the Bard's Tale games, however, doors are usually not of that make that can withstand a party of motivated adventurers. Only sometimes a well-placed kick against old wood won't do, when facing a veritable iron gate, for example.
Tales of the Unknown Edit
The Masterkey is an item that is sold by the Keymaster in Mangar's Tower. This is disappointingly late in the game, because by then the party is likely to have acquired the Onyx Key and does not need to go back to Kylearan's Tower.
The Masterkey can be used to open Skara Brae's locked iron gates that shut off Kylearan's Tower and Mangar's Tower.