Summary:
If you ever lose your transponder (also named "PATS" or "chip") key for a 2001 to 2003 Toyota Highlander, you can usually acquire a replacement on eBay for about $15 (including shipping) and then program it yourself as long as you have one working master (not valet) transponder key for your car (your ignition key with the black plastic housing, not the grey one). Your alternative is to purchase a new transponder key from your Toyota dealer for approximately $120 to $150, including programming.
Note that certain websites and guides seem to indicate that two master keys are required for user programming of transponder keys for cars made after 1998. This is simply untrue. Just witness the 2001-2003 Toyota Highlander, which only requires one master key for user programming.
Here is a photo of a typical after-market chip key blank for a 2001-2003 Toyota Highlander:
Acquiring a Replacement Transponder Key
Search on eBay for "Highlander Key" and you will typically find plenty of listings for brand new aftermarket transponder keys for your model year in either eBay auctions or eBay stores. Verify the compatibility of the remote by checking the listed make, model, and year for the key. Aftermarket, non-OEM keys will also usually mimic the head shape of the OEM transponder key.
The cheapest that I have seen on eBay is approximately $15, including shipping.
Go to your local hardware store, Home Depot, or Walmart and have your master key duplicated by cutting the transponder key blank (about $2 or sometimes free). Note that some key cutters will refuse to cut a transponder key for the following stated reason: "if I make a duplication error, your expensive transporder key blank will be ruined and I can't take responsibility for that". Tell them you don't care if one key is ruined (note that the probability of this is pretty low as long as they just do the normal key duplication process), and that you will take responsibility.
When I told one hardware employee at Home Depot how to replace a transponder key (and also how to replace Remote Keyless Entry devices), he was so appreciative that he cut my keys for free!
Programming a Replacement Transponder Key
Your Toyota Highlander has the capacity to accept four transponder master keys programmed to operate the vehicle. This is the number I have for my Highlander: one for my wife, one for myself, one for my newly licensed daughter, and one for back-up.
Here are the steps to program your remote (you can find this repeated in numerous car forums):
1. Start with the following conditions: You are in the drivers seat, all doors are closed, and the key is out of the ignition
2. Simultaneously depress and release brake and accelerator pedals once.
3. Place an already programmed master key in the ignition. (Do not turn on)
4. Press the gas pedal 5 times.
5. Press the brake pedal 6 times.
6. Pull out the master key.
7. Insert the new key and DO NOT turn it on.
8. Press Gas pedal just 1 time and wait until security light stops blinking, (about a minute.)
9. Remove the key and Press Brake pedal 1 time. The cycle is now closed.
The programming mode will end after 10 more seconds, and your key will be programmed.
If the above does not work the first time, try again. Sometimes it takes a couple attempts.
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