The village is crucial for progression completion of both buildings will multiply soul bonus by 2-3x, especially completion of the Mill as Joey's Amulet gives you soul bonus based on equipment level.
It also allows you to enter buildings, talk to NPCs, and interact in different ways. The Village introduces free roam movement which enables you to move across the map in either direction freely. The Village Key can be crafted with 1 Dragon Scales and 5 Goblin Cloths and will spawn a Portal to the Village Dimension immediately. Astral Slayer must be purchased for 5e8 / 500 M SP to view the Village Key Astral upgrade. The Village is a Dimension that can be unlocked by purchasing the Astral Locked Astral Upgrade “Village Key” for 2.00e6 / 2 M SP which gives you access to the Craftable Temporary Item of the same name after you have Ultra Ascended.