How to use the "Toggle lock button?"

How to use the button with a lock icon?

In what way? It locks the object in the sandbox menu, making it not adjust itself if it intersects with another object. Take a plank, lock it, take another plank, lock it, rotate it 90* and put them together into a plus sign and they will stay that way, despite intersecting eachothers collision.

Of course this is only a sandbox feature so when you play the level they will snap back, but if you connect them to a static object like the Platform then they will of course stay in place. It eases making large contraptions with potentially intersecting objects and without the risk of a badly duplicated object shifting it off the grid.

Is there any way you can make a Lock Item hotkey? Would be a blast :D or thru some script

Good idea, I actually wanted to implement that while I was going through the PC keybinds in the source code and documenting some undocumented ones in the Wiki.