This test verifies proper operation of the Keyboard Controller Circuit. In most systems, the Keyboard Controller Circuit is found in an 8042 or 8742 chip. This is a programmable device, which may have an ID sticker of the BIOS manufacturer. The 8042/8742 chip has a high failure rate. If this chip must be replaced, make sure it is replaced with a Keyboard Controller that is from the same manufacturer as the original chip.
Also, note that it is not uncommon for the Keyboard Controller or the associated fuse to be damaged if the keyboard is plugged in while the system is running(PS2) (power on).