WHAT ARE THE EXACT FUNCTIONS OF A ZERO COUPON BOND? I LOOKING TO INVEST IN A BOND, I looking to build?

A PORTFOLIO AND BUY AOME STOCK, I READ UP ON SOME INVESTMENT OPTIONS , I AM A LITTLE AFRAID BECAUSE THIS IS MY FIRST TIME INVESTING OUTSIDE OF SECURE JOB PLANS/BENEFITS.
I HAVE SOME MONEY IN THE MONEY MARKET SHOULD I PULL IT?

Generally speaking zero-coupon bonds are less risky then equity investment (so it can be even safer than your IRA or 401 plan). If you're a risk-averse person and do not need to rely on a regular stream of investment income, then this investment might be right for you. Of course, you have to check the credit rating of the issuer before buying.
Unlike coupon-bearing bonds, zero coupon bonds do not pay any interest. The only payment you will receive will be only principal payment (the face value of the bond) at bond's maturity. As Gojurokusai correctly pointed out (see below), in the U.S. you still have to pay taxes on a "phantom" interest. In some European countries you do not have any taxable income (unless you sell the bond early and have capital gains) to report until bonds' maturity. Because of zero coupon payments, these bonds, especially with long maturity are sold at a deep discount. Do not confuse this discount with the low price of so called junk bonds, which are much much more risky!

The normal way a coupon bond works is that you buy a bond and it comes with coupons that you redeem, (or there's no coupon and the company sends you the interest payments maybe every six months), and the money you get represents the interest on the bond amount you paid in the beginning (for instance, you pay $1000 for a $1000 bond). At the end of the bond period, the company pays you back the original amount you paid ($1000).

A zero coupon bond is different. There are no coupons. You buy the bond for a much smaller amount of money (say $200 for a $1000 bond) and at the end of the bond period (many years), you get the amount of the bond back - $1000. The difference between the face value of the bond and what you originally paid for the bond is your interest.

If you get tired of the bond before the end, you can sell it to someone else, but depending on how interest rates have changed since originally buying the bond and how long you held the bond, the value of the bond changes up or down) you could either make or lose money just like when you buy and sell stock.

Why do people buy one type of bond instead of the other? To get the best arrangement for themselves so the way they get the money allows them to pay less in taxes. For others, it's just a preference of one way over the other.

The function of a bond is to loan money to a company or the government. If you hold the bond all the way to the end, you are guaranteed to get your money back plus interest, as long as the company/government has the money to pay you. Hence, stronger companies can pay people (you) lower rates of interest because they are more trustworthy. Newer, not so trustworthy companies have to pay higher rates of interest to get people to loan them the money in spite of the higher risk that they won't have the money to pay you back at the end.

You also have the option of buying bonds from the government. You will get less interest than if you loaned your money to a company (it's less likely the government won't have the money since they can always raise taxes when they need more money) but it's more likely you'll get your money back. Be careful, though. Not all bonds from the government are guaranteed. Some are tied to the success of a government program (like building and maintaining certain government projects) and the money to pay the bonds back come from the project itself. Some government bonds are guaranteed by the government, others aren't.

** SPECIAL NOTE TO "HEC" and "SEEKING" ** Unless the law has been changed in the past few years, which I find unlikely, knowing the U.S. Congress and the IRS), the computed annual zero coupon bond discount must be reported annually on our income tax return as interest over the life of the bond, even though interest isn't received. This tax cost tends to make zero coupon bonds unattractive to investors, unless the bonds can be bought for an IRA or other retirement plan that defers taxes on income until distributions are made.

The end of the previous answer was right on. That is the major negative of zero's in a taxable account.

look into IBONDS from treasurydirect.gov could be a smarter choice for you.