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Main thing it does is react with calcium to form insoluble CaF2. Your bones are made of calcium and your meaty parts use soluble calcium in cellular chemical/electrical control signals, so if you're exposed to too much fluoride your cells go haywire and die, you probably die of a heart attack and your bones get demineralized.
Small amounts of fluoride in water/toothpaste substitute OH- groups in tooth enamel and bind calcium there, remineralizing your teeth so they last longer.
It only really causes problems in large doses or if there's more of it in your diet than calcium.