Does a 2001 mercury cougar have a chip in the key

Yes, it does........

The Passive Anti-Theft System (PATS) is fully passive in operation and requires no special procedures by the driver to arm or disarm the system. It is invisible to normal scrutiny and is operated by a miniature transponder within the key body. The transponder communicates with the powertrain control module through a transceiver mounted around the ignition switch lock barrel. The PATS functionality is incorporated within the powertrain control module.

PATS may be identified by a larger than normal sized ignition key. A larger sized ignition key indicates the presence of the transponder that controls the system.

The transponder code reading is carried out when the key. having been inserted into the ignition lock barrel is turned from position "0" to position "II" to crank the engine. If the Powertrain Control Module (PCM) receives the correct code the engine will start. If the PCM receives either no code or an incorrect code the engine will not crank and PATS remains armed and the engine immobilised.

Anti-Theft Indicator
Whenever the ignition is switched on the anti-theft indicator will remain on for three seconds while the system reads the ignition key code.

The anti-theft indicator will flash rapidly or glow continuously after the initial three seconds to indicate the PATS has immobilised the vehicle.