The original AP slugs developed by researchers for handguns were made using a hardened steel design, sometimes even tungsten carbide was used.
This proved to cause serious wear on the barrels rifling so the engineers designed a jacketing material/process to reduce the accelerated wear.
Teflon was used originally as the coating due to it's low cost and easy application, this was well publicized by the KTW company and the news media as the "cop killer" bullet, it was the hardened steel bullet with relatively high velocities, not the teflon that enabled it to defeat soft body armor at the time.
Today's AP rounds are made using a saboted ceramic jacket design although some of the older designs like the THV use a brass/copper jacket alloy.
In general with coated bullets you can reduce the friction levels between the bore and the bullet you will achieve slightly higher velocities and slightly increased accuracy.
As David pointed out, the old KTW ammo was teflon coated (in a sickly green color) to help ease its passage down the bore. The bullet had "driving bands" machined onto it as well, thus decreasing the surface area of the solid bronze bullet that the rifling had to engrave itself into.
One thing is for sure; if a given person seems overly enamored or horrified at the prospect of a "teflon" bullet, then they are generally ignorant about ammunition and learned what little misinformation they have from the TV news shows.
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