I posted a headband project here last month. The fabric folding and size to be use in this project are the same. Click here for the details.
This project is very easy to make just follow the direction I used on my headband project and instead of putting a rubber band to close the circle you put the key ring instead.
To start with after creating your band fabric insert the key ring before close it.
Run a zigzag stick to make sure it is securely close.
Get a 4 inch long ribbon, I used brown with 1 inch width. Wrap around the ribbon and cover the zigzag stitch. Fold the end of your ribbon in one of the side.
Run a stitch both side to close it securely.