If Teflon (or other brand of non-stik coating) flakes off an old or damaged pan, it passes right through your system (just like everything else that goes in your mouth). It is, after all, the slipperiest thing on the planet. Besides, Teflon is inert and therefore harmless.
On the other side of the coin, if teflon is over heated, it give off fumes that can cause flu-like symptoms in humans or could kill small birds. The degree of overheating necessary is much more than is used in normal cooking. Essentially, if you left an empty pan on a burner for 10 minutes, you could have a problem.
There is a potentially carcinogenic chemical used in the manufacture of teflon that can impact workers in the factory. That chemical is not present in the finished product.
"If you want to make an apple pie from scratch, you must first create the universe." -Carl Sagan