It uses a laser guidance system and specially developed 25mm high explosive rounds which can be programmed to detonate over a target.
Richard Audette helped develop it for the US Army and says it's a big leap forward because it's the first small arms weapon to use smart technology.
The way a soldier operates this is basically find your target, then laze (laser) to it, which gives the range, then you get an adjusted aim point, adjust the fire and pull the trigger.
Say you've lazed out to 543 metres... When you pull the trigger it arms the round and fires it 543 metres plus or minus one, two or three metres. It means the weapon can be used to target insurgents hiding behind walls or in ditches without the need to call in air strikes.
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* Jun 2009 - XM25 Laser-Guided Smart Bullets