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The Star Atop the Tree was the huge “Christmas star” ornament which sat at the top of the giant Christmas tree in the centre of the Christmas Toyland in Madame Tarsa's Toybox. Carved of a magical golden crystal, it glowed under its own power. The sentient toys who inhabited the Toyland held the Star to be their realm's greatest treasure.
Unbeknownst to even Millicent, the Star had in fact been placed there by Tarsa to conceal the magical “key” to her resurrection in case of an emergency (a magical toymaker's mallet). Millicent owned a magical tome containing a rhyming riddle which hinted at this, although after having read to them, it took some time for Juliet-178, Arganthone-056 and Jenny Everywhere to figure out that the “distant star” in the poem was that star, rather than a literal celestial body in some other part of the Multiverse.
When the Star was opened in half to reveal its secret contents, a magical pulse was activated which would rouse the Snap-Dragon from Snapdragon Lake. It was known as the Guardian of the Star, and there was another living toy, a Räuchermann, positioned near the star for the specific purpose of warning whoever touched the Star about this. However, the Snap-Dragon could be defeated by dousing its fire, which would prompt it to retreat it back into the Lake. (PROSE: The Time of the Toymaker)