I did a few Google searches and checked out the Django Documentation, but I was looking for a more in-depth explanation of this, and why it is required.
For example, what could happen if the key was compromised / others knew what it was?
It is used for making hashes. Look:
>grep -Inr SECRET_KEY *
conf/global_settings.py:255:SECRET_KEY = ''
conf/project_template/settings.py:61:SECRET_KEY = ''
contrib/auth/tokens.py:54: hash = sha_constructor(settings.SECRET_KEY + unicode(user.id) +
contrib/comments/forms.py:86: info = (content_type, object_pk, timestamp, settings.SECRET_KEY)
contrib/formtools/utils.py:15: order, pickles the result with the SECRET_KEY setting, then takes an md5
contrib/formtools/utils.py:32: data.append(settings.SECRET_KEY)
contrib/messages/storage/cookie.py:112: SECRET_KEY, modified to make it unique for the present purpose.
contrib/messages/storage/cookie.py:114: key = 'django.contrib.messages' + settings.SECRET_KEY
contrib/sessions/backends/base.py:89: pickled_md5 = md5_constructor(pickled + settings.SECRET_KEY).hexdigest()
contrib/sessions/backends/base.py:95: if md5_constructor(pickled + settings.SECRET_KEY).hexdigest() != tamper_check:
contrib/sessions/backends/base.py:134: # Use settings.SECRET_KEY as added salt.
contrib/sessions/backends/base.py:143: settings.SECRET_KEY)).hexdigest()
contrib/sessions/models.py:16: pickled_md5 = md5_constructor(pickled + settings.SECRET_KEY).hexdigest()
contrib/sessions/models.py:59: if md5_constructor(pickled + settings.SECRET_KEY).hexdigest() != tamper_check:
core/management/commands/startproject.py:32: # Create a random SECRET_KEY hash, and put it in the main settings.
core/management/commands/startproject.py:37: settings_contents = re.sub(r"(?<=SECRET_KEY = ')'", secret_key + "'", settings_contents)
middleware/csrf.py:38: % (randrange(0, _MAX_CSRF_KEY), settings.SECRET_KEY)).hexdigest()
middleware/csrf.py:41: return md5_constructor(settings.SECRET_KEY + session_id).hexdigest()