The U.S. Army has been very pleased with its fancy new XM25s, the gun that can shoot "smart" bullets at enemies behind cover. But the XM25's bullets are only smart in one dimension, while Sandia National Labs has just tested a prototype laser-guided bullet that can steer itself and home in on targets.
Steerable bullets have the potential to change warfare in a manner similar to the way that the invention of guided missiles altered strategies based on dropping "dumb" bombs: instead of throwing ludicrously overpowering amounts of force at a target to make sure at least something would stick, you could instead use one single missile that could be targeted exactly where you wanted it to go and nowhere else. With a few exceptions (like the XM25), bullets are back in the era of carpet bombing: you aim as best you can, and then make up for lack of accuracy with volume. Lots of volume.
Sandia's new steerable bullet has the potential to significantly change this. As you can see, it doesn't look much like a bullet: it's four inches long, it has fins on it, and it's not designed to spin. There's a little optical sensor in the nose that can lock onto a laser target designator, and inside are electronics and actuators that take care of moving the fins to steer the bullet in-flight. The fins can correct the bullet's trajectory 30 times every second, meaning that they don't have to be super-precise: if they overcorrect a bit, they'll have lots more chances to straighten out before the bullet hits its target.
Computer simulations (and testing with prototypes) have shown that while a normal bullet can be expected to miss a target a half-mile away by nearly ten yards, these guided bullets can reliably strike within a mere eight inches. And since the bullet is following a laser dot, it's also possible to track a moving target after the bullet has already been fired from the gun.
Sandia managed to build its prototypes from off-the-shelf commercial parts, but that doesn't mean guided bullets are going to be cheap. It's likely moot, however, since being able to strike a target (and just that target) in one shot is far more effective (and, in the long run, cheaper on many levels) than spending tens or hundreds of "dumb" bullets trying to do the same thing.
Currently, Sanda (which is owned by Lockheed Martin) is looking for a private commercial partner to complete testing of these bullets and bring them to the market, a market which specifically will include recreational shooters along with the military and law enforcement.