what key is it in?

This question of what key something is in is one that comes up often, and the reasons for it being asked can range from the academic to the very practical -- it is in the spirit of the latter that we will offer up an answer.

The no.1 reason we might want to determine the key of a tune/piece or section thereof is for improvisational purposes: it's hard (though not impossible) to improvise without knowing the key. In certain cases this will be ambiguous, which means more leeway for the improviser; at other times there will be only one key.

So, let's define a key as the parent scale of all the harmonic/melodic structures in a given instance. That might be a rather convoluted way of stating something very simple. Here are some examples.

A favorite: Knocking On Heaven's Door by Bob Dylan. The chords:

      Gmaj | Dmaj | Amin | Amin | Gmaj | Dmaj| Cmaj| Cmaj| (repeat to infinity)

The key here (according to our definition) is fairly unambiguous: G major. Major keys give us 3 major chords and 3 minor chords. In G major those chords are specifically: Gmaj, Cmaj, Dmaj; Amin, Bmin, Emin. All of the chords of the tune number among those just enumerated, so there we have it.

Here's a slightly more involved one: House of the Rising Sun.

      Amin | Cmaj | Dmaj | Fmaj | Amin | Cmaj | E7 | E7 |
      Amin | Cmaj | Dmaj | Fmaj | Amin | E7 | Amin | Amin |

We have 4 major chords (analysing E7 as such) which tells us right away that we're going beyond the chords found amongst our normal major keys. In this case Amin going to E7 is telling us that this in in A minor. Now there are 3 different minor keys:

     1. Natural (same as its relative major)
     2. Melodic
     3. Harmonic

One way of looking at this would be to say that this song is in A natural minor (i.e. C major) whenever the chords are Amin, Cmaj, or Fmaj. When we encounter Dmaj it's probably really in A melodic minor (the natural 6 gives us the F#) but it might be easiest to think of it as Gmajor (D mixolydian). The E7 is either melodic or harmonic minor.

How about a chord progression like this:

     Emaj7 | Bmaj add b9 | Amin | AminMaj7 |

There are some possibilities here, but all of these chords come from E harmonic major, though you might conceptualize/hear it as shifting from E major to A minor.

Of course there are other indicators that you might already be aware of / be doing: II - V is more or less subsumed by our definition, but it is a distinct and very prevalent pattern to be on the lookout for.

Keep one thing in mind: this is a practical way of understanding the concept of key. Take the following example:

      Dmin | Cmaj | Dmin | Dmin |

According to our method this is in C major, though really C doesn't seem to the tonic but instead D does (that is the progression is in D dorian). However have no fear: as far as improvising goes you'll still be on solid ground if you're thinking C major -- though knowing the major key's derived modes is a good idea.

For the above mentioned "way" to work of course we need to know some basic scales (and where to look for those that we might not know) and their triads, and all of us can always learn more of these.