This is the game's starting sword, used by knights of Skyloft to protect the land from monsters.
Keese can be tricky little buggers. They fly relatively erratically until they spot you, at which point they try to dive-bomb you. You can tell when they're about to attack because their eyes flash red. They go down easily, but because they're so small and agile it can be hard to hit them if you aren't skilled with your blade or other weapons.
Your sword can slice right through a Chu Chu, but it'll continue to grow if you don't deal with it quickly. Each time you cut one, it divides into smaller segments, which will recombine unless you take them out. Red ones set you on fire and Yellow ones are charged with electricity.
Once you win the birdriding competition during the Wing Ceremony, Zelda will give you this Sailcloth as a memento. You can use it to glide short distances while jumping, to catch updrafts of air to gain altitude, or to slow your descent while skydiving.