The English "o'clock" does not exist in Finnish, so "kello" here is the same as "It is" in the English sentence. You can think about this as 'kello' meaning both: 'clock' and 'time'. So when English people ask "What time is it?", Finns ask "Mitä kello on?" (or "Kuinka paljon/Paljonko kello on?") and to this you can answer with "Kello on kaksitoista." or _"Se on kaksitoista." (The latter sentence means "It is twelve (o'clock).")
I think in the English' spoken language the o'clock can be omitted.