I was confused about this as well, when I brought mine home last month.
The blue fob is for an alarm system. Mine came with a handbook for the alarm system, you might have it, but it's not very detailed anyway.
Turn off your bike, remove key, standing next to it push the top button. If the alarm system is hooked up, it will chirp and a little red light will blink on the panel beneath the seat, on clutch side. If you don't hear anything, the light doesn't turn on, then most likely your alarm is disabled. Mine was disabled. Remove the side panel and you'll see the alarm wire with a bypass plug. Remove the bypass plug, and plug in your alarm. Now it should work.
The problem is, by default that alarm is set to arm itself automatically every time you turn off your bike. So you could go somewhere, the fob runs out of batteries or gets wet or you lose it, now you can't start your bike. It's best to reprogram your alarm so that it only arms when you push the button. You can do that by following this procedure.
1. Start the engine, then shut it off. Set the manual alarm by pushing the key fob button within a few seconds of shut down. The system is now fully armed.
2. Immediately after arming it (the book says within 10 seconds) turn the key on, the alarm will beep once.
3. Push the arming button on the key fob 4 times. The bike will make a sound you never heard before (the book calls it a Boop) 4 times. This confirms that you did it right. If you don't hear 4 Boops, start over again.
4. Turn the key Off. The system is now ready for reprogramming.
5. Turn the key on then off 7 times and then one more time ON (a total of 8 turn-ons). The LED on the side panel (the "real" alarm indicator) should be on.
6. Press the key fob arming button twice. You should hear the weird Boop noise again, confirming the action.
7. Turn the ignition Off and then press the key fob button one last time to exit reprogramming mode.
Regarding the key. You can have a second key made, but you need to know the special 5 digit security code that the previous owner probably created. If you don't have that special code, you can try to guess it (others have said 00000 or the last 5 of the VIN might work).
In my case, the previous owner never did setup a 5 digit code. I know that because every time I turned on the key, the display showed the word CODE until it was started. That annoyed me so I read the manual and discovered that the word CODE will appear until a 5 digit secret code has been created. I created the code, wrote it down to keep with the bike paperwork, now I don't see the word CODE when I turn on the key.
I've heard about people who buy these bikes, they don't know what code was setup by previous owner, and they lose key. Then they need to buy a whole new brain for the bike.
Hope this helps.