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Since it sounds like you're new to the Prius, I'll translate firepa63's answer for you:

The "Smart Key System" (called "Smart Entry / Smart Start" in 2004,) is the fancy super-high-tech key that you never even have to remove from your pocket/purse. You just walk up to the car, grab the handle, and it unlocks. You sit down, push the brake, and press the 'Power' button, and the car turns on. If you don't have the Smart Key System (SKS) then you have to push the button on the remote to unlock the door, and put the key in the slot on the dash before pressing the Power button.

SKS remotes have the Toyota logo in silver. non-SKS remotes have the Toyota logo in black. Technically speaking, a non-SKS remote will work in an SKS car, and vice versa, but you only get the lowest feature set. So for the non-SKS remote, you would have to press the buttons on the remote, and would have to put the key in the slot, even on an SKS-equipped car. The reverse is also true, you can pair an SKS remote to a non-SKS car, but you don't magically get the SKS features.

P.S. To me "fob" is a separate device on the keychain from the key, "remote" is the actual electronic key. So I say "remote" when meaning what you are calling a "fob". On older cars with a remote for the doors, the remote was physically separate from the key, in which case, the remote could correctly be referred to as a fob. On the Prius (and many other new cars,) the remote is physically linked with the key, in which case, it is either just "the key", or "the remote". (Or, in the Prius' case, the physical key could actually be left out, as it's only NECESSARY when the battery dies, to open the door.)
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