The UID key (device's unique ID key) is an AES 256-bit hardware key, unique to each iPhone. It's fused into the application processor during manufacturing. It was previously used to encrypt things in the NOR. In later iOS versions, it is used to encrypt the entire file system, so that the flash chips cannot moved to another device and read out there again. On the S5L8960 and later, the SEP has it's own UID in it's own AES Engine, and that UID is the one used to encrypt the filesystem on iOS, not the AP's anymore. On the S8000 and S8003 and later, the chip securely generates the UID for the device which is then used to encrypt the whole filesystem.
Apple says about this key:
"The UID is unique to each device and is not recorded by Apple or any of its suppliers."
"The UID is not related to any other identifier on the device."
See also: GID Key.