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Yubikeys are small (or even very small) USB devices purchased from Yubico. Their primary purpose is to increase your online security when configured with supporting online accounts (including Gmail, LastPass and Fastmail, to name a few).
On logging into an account, you enter your password. Then, if your Yubikey has been configured, you are asked for your Yubikey code. You simply plug your Yubikey into a USB port and press it. This generates a one-time password, which is sent to a server for verification, and which cannot be reused. If you have the correct Yubikey, you are logged into your account.
Yubikeys are therefore a type of second-factor authentication (2FA) based on the principle that you should be asked for something you know (a password) as well as something you have (in this case your Yubikey) to authenticate you.
I have used Yubikeys with various online services for 2 years. They are convenient, nearly indestructible and come with several advantages over other 2FA methods. The first is that you can configure multiple Yubikeys with multiple accounts, even with people you trust. So if you lose your Yubikey, a friend can help you with theirs. (Your friend can't log in instead of you though, because they don't know your password.) Secondly, they are anonymous in the sense that Yubikeys hold no information about you, and neither does the manufacturer Yubico. They are also a good alternative to using 2FA apps on mobile phones (e.g. Google Authenticator or Authy). They are very, very tough and much cheaper to replace than a phone.