{edit} we both posted at the same time....... Well the key of G means a range of sound with G as the tonal center. That would include the notes of the G scale, i.e. G, A, B, C, D, E, F# for the melody notes or chords made from those scale notes, i.e. G, Am, Bm C, D, Em F#dim for the harmony.
A bluegrass chord progression in the Key of G would probably revolve around the G, C, D7 chords with an Em or Am thrown in for flavor or color.
http://www.jaybuckey.com/PDF/Free%20...gap_guitar.pdf