This element has to do with encryption and this is what Netscape writes about it:

The KEYGEN element facilitates the generation of key material and submission of the public key as part of an HTML form. This mechanism is designed for use in web-based certificate management systems. It displays a menu of key-size choices from which the user must choose one. Then, when the submit button is clicked, a key pair of the selected size is generated. The private key is encrypted and stored in the local key database.

The public key and challenge string are DER encoded as PublicKeyAndChallenge and then digitally signed with the private key to produce a SignedPublicKeyAndChallenge. The SignedPublicKeyAndChallenge is base64 encoded, and the ASCII data is finally submitted to the server as the value of a name-value pair, where the name is specified by the NAME attribute of the KEYGEN element.

CHALLENGE
specifies the challenge string to be packaged with the public key in the PublicKeyAndChallenge for use in verification of the form submission. If no challenge string is provided, then it is encoded as an IA5STRING of length zero.

<FORM> <KEYGEN name="thekey" challenge="4310527096"> </FORM>