Way back, there were some rare keyboard / motherboard combinations where the motherboard couldn't detect there was a keyboard attached unless a key was pressed on it. That message was for those people with those combinations.

You pressed F1 and the computer would be like "my bad, there is a keyboard there, thanks for your help", or rather it would just shut up and boot.

The message could have been different but it had to fit in a small amount of BIOS ROM, so we got stuck with the one that covered all the bases the best, and unfortunately, most people who saw it didn't actually have a keyboard plugged in, thus, irony.

The error message sounds bad, but it was actually a good thing. A better phrased error message might have been "Keyboard missing. Connect a keyboard and press F1 to continue." But, in the early days every byte mattered.

The system wouldn't work without a keyboard, and if you get further into the boot process you might not be able to shut down cleanly if you didn't have a keyboard attached. That error message gave you a chance to attach the keyboard, or to troubleshoot why the keyboard wasn't being properly detected (like the plug got bumped and wasn't making good contact anymore).

It was annoying when the lack of a keyboard was intentional. Like, you wanted to use the machine as a server. But, AFAIK you could disable this check if you knew the machine was going to be a server with no permanent keyboard attached.