Windows backup has no security built in. It DOES preserve permissions. If someone grabbed that file and restored it on another machine, they would not IMMEDIATELY be able to access the files - but they could easily take ownership of the files and then not have a problem accessing them.
There is the slightest of chances the file was encrypted on the disk using NTFS encryption, but unlikely (I've never encountered anyone that's even tried to use NTFS encryption - check the properties of the file).
BKF is the standard file name created for NTBackup (Windows Backup in 2000 and 2003) files. BKS, if memory serves is the SELECTIONS of what was to be backed up (makes sense considering it's size).