quite simply, it's a "portable keyboard". It's a small portable synthesizer (with keys of course) that has a handle similar to that of a guitar. The neck is usually kind of thick but still can be gripped by one hand. It may sport switches and buttons to alter the sounds being played. Keytars are convienient.
Jan Hammer of "Miami Vice" and Mahavishnu Orchestra fame glued a handle on his Probe keyboard for ease of walking around on stage while playing. This may be an example of an early keytar, but it wasn't called by that word yet.