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Deals damage. The target's Defense stat, and not its Special Defense, is used in damage calculation. All other factors work as expected.
Secret Sword, the signature move of Keldeo, is a great addition to the little pony's movepool. Secret Sword's effect of hitting the opponent's physical defense means that the premier special walls, Chansey and Blissey, have no chance whatsoever of walling Keldeo, despite its somewhat middling Base Power.
Aura Sphere is a slightly more powerful alternative, which calculates damage normally.
Focus Blast is a much more powerful but less accurate alternative, which calculates damage normally.