What is a Get Mega X-Key? Is it needed?

It is not needed, especially in the long term, but it may be a good idea.

The Mega X-Key is a memory unit (a.k.a. "memory card") with a USB connector, which will let a user copy files from a computer using the USB port to the memory unit. The memory unit can then be used in the Xbox. An Action Replay seems to have similar capabilities.

Soft modding involves using a saved game that is designed to exploit a bug in a commercial Xbox game, but first that saved game needs to get onto the hard drive. One way to initially write a save to an Xbox hard drive is to copy data from a memory unit. (Others include using a mod-chip or hot-swapping the hard drive.) One way to write to a memory unit is for that memory unit to be a Mega X-Key, and using the Mega X-Key's USB connector to copy data from a computer. (Another way to write to a memory unit is to copy a saved game from another Xbox that already has the saved game on it. Another way is for the "memory unit" being used to be a standard USB device using a USB adapter, and writing to the memory unit using a computer with USB support.)

I myself have not used a Mega X-Key. Instead I used an expensive digital camera belonging to my roommate, and my roommate re-configured Linux on a machine to be able to support the XFAT file system that the Xbox uses. Later I ended up buying a Mad Catz memory unit along with a controller for some ridiculously low price that the store has since stopped using as a price for this combination.

The best way to write to an Xbox's hard drive, in my opinion, is with the Ethernet cable. Once you can FTP files to and from an Xbox, the extra size of the Mega X-Key is less valuable because many large files can be transfered without using a memory unit. However, I don't know of a way to use an Ethernet cable to transfer files on an Xbox that hasn't been hacked yet. A Mega X-Key is definitely not needed: a free way would be to do a hard drive hot swap. That will void an Xbox's warranty, though (by damaging stickers that, undamaged, prevent the Xbox from being opened) and Grospolina says Hotswapping can damage your Xbox and/or computer that is being hot-swapped with.

The problem with a Mega X-Key is that they are not widely distributed in stores around the USA. Obtaining a Mega X-Key seems to generally require sending $41.95 to Lik-Sang.com which seems reputable (I've had no problems with the multiple, multiple orders I've made to the company) but it involves paying for international shipping and then waiting for the international shipping.

In summary, a Mega X-Key is probably not a bad idea, and in fact it may very well be a good approach, but it is not the only option.