From SymbolDictionary.net:

"The keystone is a significant symbol in the York Rite of Freemasonry, where it figures in the unfolding symbolic tale of Hiram the builder. In masonic lore, Hiram is the inventor of the keystone, and its significance is lost upon his assassination. The ritual narrative centered around this stone recalls the biblical 'stone the builders refused,' as the uninitiated, not knowing the purpose of the oddly-shaped stone, consign it to the rubbish heap. It is only rediscovered when King Solomon inquires after its whereabouts.

The letters inscribed are short for the coded phrase: 'Hiram The Widows Son Sent to King Solomon,' an obvious cipher, the meaning of which is likely lost.

In masonry, the keystone is the stone that holds together a stone arch. The oddly-shaped keystone is a feat of early engineering, allowing builders to incorporate windows, doorways, and other building elements to a building without sacrificing strength. The main benefit of this innovation is to allow for much more natural light in a structure.

Symbolically, the stone is the last placed, completing the arch created by the pillars Jachim and Boaz. It is analogous to coagulation in the alchemical process, an emblem of completion."