This is an extract from a paper that I found referring to the mechanisms surrounding the function of colloidal silver (The Truth About Colloidal Silver And Gold Separating Fact From Fiction):

As mention previously, silver content of colloidal silver is measured in parts per million (ppm). This figure describes the total concentration of silver in the liquid, the concentration of silver particles and positive silver ions. Generally, the total silver in these products is composed of 75 to 99 percent positive silver ions and the remainder of silver particles.

Jung, WK, et al. “Antibacterial Activity and Mechanism of Action of the Silver Ion in Staphylococcus Aureus and Escherichia Coli.” http://aem.asm.org/content/74/7/2171.short
Key, Frances S. and George Maass. “Ions, Atoms, and Charged Particles.” http://www.silver-colloids.com/Papers/IonsAtoms&ChargedParticles.PDF

Research indicates that the silver ions are effective against microbes. When a person drinks colloidal silver, the silver ions move throughout the body and bind (attach) to parts of molecules, thiol groups. One place thiol groups are found is in the amino acid cysteine. Amino acids are the building blocks of genetic materials, DNA and RNA. They are also part of cofactors, helper molecules that assist the body in a variety of lifesustaining chemical reactions. Another group that utilizes thiol groups is enzymes, which can be thought of as the go-to guys that get things moving in the biological world. Enzymes catalyze (cause or increase the rate of) biochemical reactions, and without them, very little would happen within us.

As mentioned previously, it has been suggested that AgNPs may act as Trojan horses by entering the cells and then releasing silver ions that damage intracellular functions, but ions can damage the membrane too.

Silver attaches to the thiol groups that are essential for the wellbeing and survival of bacteria. Silver blocks the thiol groups from being able to participate further in chemical reactions, thus blocking the activity of many enzymes that are essential for bacterial survival. In many cases, silver interferes with bacteriological chemical reactions, preventing them from happening. In other instances, they change components of bacteriological substances, rendering them faulty or unstable. To date, much of the evidence supports the idea that the silver ion somehow enters the bacterial cell to disrupt their structure and their metabolism and finally kill them. A recent Italian study suggests that silver ions interact with proteins on the bacterial cell wall. This interaction creates cell membrane holes, enabling the cell cytoplasm (essential fluid inside the cell) to leak out. Ultimately, this results in cell death. In any event, whatever the mechanism of action, the end result is damage to microbes.

The therapeutic and toxic effects of silver can only be exhibited by free silver ions. Nevertheless, the threshold toxic values of silver must be interpreted with some caution, because the measured silver concentration may include both bound and free silver ions or nanoparticles.

Colloidal Silver Conclusion 8: Positively charged silver ions, slowly released from particles of a professionally made colloidal silver solution, can enter the body. Once inside, these ions are somehow able to interfere with the normal workings of microbes, bringing about their destruction.