Toothed lock washers resist rotation by "biting" into the the surface. The internal toothed style is more aesthetically pleasing, whilst the external tooth has greater holding power.
Toothed lock washers are also used for electrical ground bonding connections where the washer is placed between the surfaces to be bonded, not under the screw head or nut. The teeth of the washer cut through paint, surface oxides etc making a better electrical connection. When used in this manner the washer provided little anti rotational protection.