Originally Posted by 8VETTE7

Try cleaning the resistor pellet on your key. Use the eraser on a pencil and then wipe it off with a lint free cloth. Could also try your backup key. If neither of those work you may need to get a small container of aerosol contact cleaner (parts store or Radio Shack) and spray some into the key cylinder. Then insert and remove the key a dozen or so times wiping the key on a lint free cloth between insertions. Last likely thing is the small wire inside the key cylinder that wipes across the pellet on the key to read the resistance of the pellet may be damaged. That resistance value read is sent to the BCM and then compared against the value stored in the PCM. Match and you get to crank the car. No match and the starter is disabled and the SECURITY light on the dash remains illuminated.

If the wire gets damaged you have two choices. First is to replace the key cylinder. Second is to bypass the VATS system by inserting a precision resistor in the circuit that reads the pellet. No more security feature so car can be a little more easily stolen if the thief knows you have bypassed VATS. (not likely).

Start with cleaning the key and the contact cleaner if necessary before going any further..... If you have to go further, post back. I have the resistance charts for the C5 and details on cylinder replacement if you get that far.