The key is mixed with two fixed pads.
Start with a tiny key
The toy block size is 2 bytes, and the pinned key is 0x0f0e.
block bytes=2
The inner pad is fixed
The inner pad is 0x3636. XOR with the key gives 0x3938.
key⊕ipad=0x3938
The outer pad is different
The outer pad is 0x5c5c. XOR with the same key gives 0x5352.
key⊕opad=0x5352
Summary
The two pads make two different keyed prefixes: 0x3938 inside and 0x5352 outside.
pads=2