al literally means "to the"
But it can be used in expressions where English would use: "of", "of the", "with the", and so on. It's one of those things that you just have to learn whether the correct prepositions to use is 'a', 'di', "in", etc... because they don't always map to their English equivalent.
This sentence (Sono bicotti al cioccolato) is probably closest to the English meaning of They are cookies with chocolate (ie cookies with chocolate bits in them). With is usually 'di' in Italian. But you use "al and not "del" (del = di + il) in this situation just because...
(Actually I don't know if there's a reason why. When I studied Italian at uni we were told you just have to learn them - sometimes they match up to the English choice, sometimes they don't)
In British English, maybe. In the USA, biscuits are something very, very different. Think of savory scones.
In Italian, subject pronouns are mostly optional. You can almost always tell from the verb whether the subject is 1st, 2nd, or 3rd person, singular or plural.
"Essere" is irregular and the "io" conjugation is the same as the "loro" conjugation, but since it's a linking verb, the subject complement in the predicate must agree with the subject. Since "biscotti" is plural, the subject must also be plural (also, context tells you it's very unlikely that someone is saying "I am chocolate cookies").