A Keychain (キーホルダー, Kīhorudā?) is a magical piece of equipment that modifies the appearance and abilities of a Keyblade. In Kingdom Hearts 358/2 Days, the Gear Panel function replaces Keychains, and in Kingdom Hearts Re:coded the Keyblade Chip in Gear Matrix replaces Keychains. Likewise, the Card system replaces Keychains in Kingdom Hearts: Chain of Memories. Cards, however, do not affect appearance, only ability.
The Keychains have the ability to change a Keyblade's stats, grant it special abilities, and give it a new appearance. While most Keyblades have a basic form, like the Kingdom Key, a Keyblade wielder can upgrade and change the form of the Keyblade with a Keychain. In other words, when Sora or another wielder is equipping a "new" Keyblade, he or she is equipping a different Keychain to the Keyblade, changing its form.
It has not yet been explained exactly what a Keychain is and why it has the power to transform the Keyblade. A wielder usually receives a Keychain after "completing" the events that transpire within a world, but with a few exceptions in which the protagonist is shown being given or finding a token, the Keychain simply appears in their inventory without explanation. These Keychains are often modeled after elements of the world from which they are received in some way.