A spectator is called from the audience and asked to examine a bullet. The spectator, after affirming that it is a real bullet, signs it. The spectator then examines a gun and, after being convinced that it is real, signs it and puts the bullet inside. The magician is then examined and signed and walks to the far end of the stage. At the magician's command, the spectator fires the gun at the magician, who catches the bullet (either with a hand or, more dramatically, the teeth).
The secret is in the bullet. A magician wishing to learn this feat begins with bullets that have almost no power in them. They are so weak that they barely make it out of the barrel of the gun and are easily caught. From there, the magician works through stronger and stronger bullets until a load of powder is found that will allow a bullet to exactly reach the magician across the stage but go no further. It is simplicity itself to catch a bullet that, energy spent, can barely move through the air.
Note, however, that a bullet that isn't properly prepared, a spectator that moves off the mark, a malfunctioning gun, a badly timed blink during the bullet's flight, or a strong current of air can easily turn this delightful trick into a death sentence.