Quote Originally Posted by Hikaro Takayama
Here's my theory (based on something I noticed in the opening FMV as well as when you trigger the gunblade during battle in the game):

I believe that the gunblade operates on the priciple of explosive, incindiary rounds, possibly made from plastic explosives (which would give them a shiny surface), that when fired, the explosion generated is expelled through vents on the side of the blade (I'll see about grabbing a SS of what I'm talking about tomorrow), which, if said blade was sticking inside of an enemy, would cause severe internal trauma.... a rather wicked close quarters weapon, if that's the case. Of course you'd need some powerful Steel-titanium-molybdenum alloy to even think of containing the pressures generated by such an explosion (although with the revolver, some of the excess pressure can leak out of the gap between the cylinder and the 'barrel').
Were that the case, when Seifer slashed Squall's face in the opening FMV, the heat generated would have 1) immediately cauterized his wound, and 2) probably blinded him. It wouldn't be a very practical weapon if it was burning wounds closed.

In any event, as has been pointed out several times, the Final Fantasy VIII Ultimania Guide states that the function is to produce a vibration to the slash motion that will rend a wound greater than it would normally.