The .223 is one of the best of the small guns pistols. It does more damage than any other non-energy pistol, and fires a .223 FMJ round, which has the best DR modifier and second-best AC modifier of any ammunition. The only downside is the low ammunition capacity, a paltry 5 rounds. Even the 14mm and .44 revolver hold more ammunition. Still, with .223 a common caliber and the damage on the .223 pistol being astronomical, it's easily one of the best weapons in the game.
This pistol's appearance is modeled exactly after Deckard's handgun in Blade Runner, right down to its double triggers and red LEDs.
The .223 pistol was planned to be included in S.T.A.L.K.E.R.: Clear Sky as an easter egg, along with the Bozar and generic .223 ammunition, but only remains partially implemented in the game's resources.
The .223 pistol, despite being labeled as a pistol, uses the sub-machine gun animation. This prevents certain models, like Cassidy's or Vic's, from using it, but lets others like Sulik and Katja wield it.
When they carried this weapon over from Fallout into Fallout 2, the developers neglected to change the description. While in Fallout this was indeed a one-of-a-kind weapon, you can find several of them throughout the game in Fallout 2, making the description a bit misleading.