What does PHP keyword 'var' do?

It's for declaring class member variables in PHP4, and is no longer needed. It will work in PHP5, but will raise an E_STRICT warning in PHP from version 5.0.0 up to version 5.1.2, as of when it was deprecated. Since PHP 5.3, var has been un-deprecated and is a synonym for 'public'.

Example usage:

class foo {
    var $x = 'y'; // or you can use public like...
    public $x = 'y'; //this is also a class member variables.
    function bar() {
    }
}

The var keyword is used to declare variables in a class in PHP 4:

class Foo {
    var $bar;
}

With PHP 5 property and method visibility (public, protected and private) was introduced and thus var is deprecated.

I quote from http://www.php.net/manual/en/language.oop5.visibility.php

Note: The PHP 4 method of declaring a variable with the var keyword is still supported for compatibility reasons (as a synonym for the public keyword). In PHP 5 before 5.1.3, its usage would generate an E_STRICT warning.