​1. As written, the code could be used in either a Subroutine or a Function in Word; some minor modifications would be required if you wanted to run it against a Word document from Excel.
2. As used in the code you posted, .Range refers to an entire bookmarked range. As in Excel, you can use Range(Start, End), but Start & End refer to character positions in Word. I'm not sure what you mean by ''keywords'; a look under 'Range Object' in the Word VBA help file will take you to a list of Range object's members.
3. You don't - it's just a code snippet from a larger project (e.g. a Subroutine or a Function) which would be 'invoked'.
4 & 5. Try something along the lines of:
Sub Demo()
Application.ScreenUpdating = False
Dim i As Long
With ActiveDocument
  For i = 1 To .Bookmarks.Count
    With .Bookmarks(i)
      If .Name Like "Set_Family_Number_#*" Then
        .Range.Font.ColorIndex = wdWhite
      End If
    End With
  Next
End With
Application.ScreenUpdating = True
End Sub