After batch determination configuration has been done. We need to create batch search strategy by tcode MBC1/COB1.

What is the use of this Batch Key/How the value be determined as X,1,2?

That key will activate once You do the Batch Determination.

In initial stage It will saw X (If material is Batch Managed)

Now after doing Batch Determination you will find that Line item of that component is increased to 2 or more (Depends on No. Batch Split).
For first Line system will saw 1 as Batch Key - And it saws the total Required qty (Batch Field for this line item will Grey out)

And 2 line item will saw 2 as batch Key - And it will saw the Batch Qty allocated to this order.

Similarly in case of more than 1 Batch Split for all other Line items you will find Batch Entry 2.