It's basically like shooting a normal round, the bullet is made of plastic and filled with flourescent paint. They sting a little when you get shot, have a tendency to tear threw clothes and leave scars, but are more or less fine to shoot each other with. The military use these somewhat regularly, and the 5.56 seems to work fairly well. Unfortunately, use of simunition also requires the use of a mask and sometimes neck protector and a cup. These are much nastier than normal paintballs or airsoft pellets, espiacelly at close range. Long range is not so bad as they seem to slow down quickly.
It would be crazy if there was some event where everyone could bring their AR's and pistols and load up with simunition to play a few rounds of 'paintball' in an old factory or something just for fun. It would never be allowed for civilians to do that here in Canada though.
-Steve