What exactly is the FILE keyword in C?

is this a keyword or special data type for C to handle files with?

What you are refering to is a typedef’d structure used by the standard io library to hold the appropriate data for use of fopen, and its family of functions.

Why is it defined as a pointer?

With a pointer to a struct, you can then pass it as a parameter to a function. This is for example what fgets or fgetc will accept, in the form of function(FILE* fp)

The fopen function will return a pointer to a newly created FILE struct, assigning this new pointer to your unused one will cause them to point to the same thing.

Does it contain a stream to the file within and other data?

The structure definition seems a little more illusive than its description. This is directly taken from my stdio.h, from MinGW32 5.1.4

typedef struct _iobuf
{
    char*   _ptr;
    int _cnt;
    char*   _base;
    int _flag;
    int _file;
    int _charbuf;
    int _bufsiz;
    char*   _tmpfname;
} FILE;

Which includes the lovely comment before it:

Some believe that nobody in their right mind should make use of the
internals of this structure.

The contents of this structure appear to change greatly on other implementations, the glibc sources usually have some form of commenting but their structure for this is burried under a lot of code.

It would make sense to heed the aforementioned warning and just not worry what it does. 🙂