It opens the door to the room with the teleporter which leads to the prison cell. Montagu starts off beside the door, on the level below the door that leads to the chalice chest. If he is alive you can bribe him, challenge him to a duel or mindread him and use that information to get the door open, but if he is dead you need the key.
It certainly looks like there was going to be more stuff with the goblin prisoners, though. In the Developer's Cut version on PC you can use a cheat window to open the door and talk to one of the goblins inside, named Vixxit. He just says "The door is open. Let us escape, goblins! To totems and Svadilfari!". And then they all just continue to stand around.
