A hair clip is used in the King's Ransomquest to unlock a gate. It can be obtained by casting the Telekinetic Grabspell on one of the guards of the gate. If players lose it after the quest they can speak to Merlin in Camelot to receive another. Players may use the drop trick to obtain several. He won't give you any if you have some stored in the bank.
It can be used just like a lockpick, unlocking many kinds of doors; however, it doesn't work with chests, other than the chest on the 3rd floor of Oldak's house in Dorgesh-Kaan, the chest in the Bandit Camp in the Kharidian Desert, and the chests in the Thieves' Guild.