In the hands of a person who cannot cast arcane spells, this is merely a masterwork longsword that gives a -1 to AC, due to the lack of a guard.
In the hands of a person with the ability to cast arcane spells and the longsword proficiency, this blade becomes a Brillant Energy Longsword with an enhancement bonus equal to half the highest level spell the character can cast, rounded up. The guard appears as energy, so the AC penalty disappears.
Thus, in the hands of Mialee the 5th level Wizard, (who is able to cast third level spells) the blade is a +2 Brilliant Energy Longsword.
Furthermore, the blade allows arcane casters to spontaneously apply a metamagic feat the caster knows to any spell. The modified spell(s) does not take up a higher spell slot. The blade can only modify a number of spell levels equal to its current enhancement bonus per day.
Continuing the example, Mialee knows two metamagic feats- Extend spell and Empower Spell. Because The Blade of Celinil ia a +2 weapon in her hands, she can freely apply Extend Spell to two spells or she can freely apply Empower Spell to one spell.