The energy involved is enough to turn the both projectile and the armour to liquid.

Once the projectile penetrates the armour it sprays out aa a jet of hot metal and solidifies as dust. (Depleted uranium also burns at high temperatures, so the liquified projectile is also on fire).

Penetration depth (hydrodynamic penetration) is a function of the relative density of the liquids and the length of the projectile, which is why DU is favoured.

The Wikipedia article says it's "self sharpening" on impact. I think this involves the projectile's leading parts ablating away into burning pyrophoric dust as they interact with the target.