I'm writing this because this is a frequently asked question (FAQ) on V8, and one of the first modifications owners make to an older car, is to replace the points. The points ignition has been around for a long time, and is very reliable, and easy to work on (GM), but it isn't maintenance free. Despite all the hype out there, there is no performance to be gained by replacing points in most stock and mild combinations. There may be some drive ability gains from a hotter ignition, including faster starts, and longer spark plug life including resistance to fouling.
This is how the stock points system works. Extending from the firewall engine harness connector(below the brake booster), is a calibrated length of special resistance wire. This wire does not extend all the way to the positive side of the coil. In the harness, it is joined by a wire leading from the "R" terminal of the starter solenoid, and from there, it extends to the positive side of the coil. There is a shorting switch inside the starter solenoid. When the starter motor is cranking the engine to start, the shorting switch inside the solenoid, sends battery voltage through the yellow wire to the coil positive, effectively bypassing the resistance wire. Once the engine starts, and the key is released to the run position, the yellow wire ceases to supply voltage, and voltage flows from the firewall via the resistance wire. This drops the running voltage so that point life is maximized.
To test the system for proper functioning requires a volt meter. Connect the voltmeter between the positive side of the coil and ground. Turn the ignition switch to the run position. The reading should be 5.0-5.5 volts. It is important that the ignition points be closed for this test. If the points are open, the voltmeter reading will be full battery voltage. Bump the engine over until the points are closed, and check again. Again, 5.0-5.5 volts is the normal reading with the engine stopped, ignition key in the run position, and the voltmeter connected between the positive side of the coil and ground. The second part of the functionality test requires that you pull the coil wire out of the distributor, and ground it so the engine will not start. With voltmeter connected as before, crank the engine continuously, and observe the voltmeter. The reading should jump from the previous 5-5.5 volt reading up to 9 volts minimum. If it does not, it indicates a problem with the shorting switch inside the starter solenoid, or a wiring problem between the "R" terminal of the solenoid, and the coil. This will result in hard starting when cold.
If you are installing a points conversion, it is important to READ the instructions and determine if the system requires full battery voltage, or if it needs resistance on the primary side of the ignition. If it requires resistance, you can leave the stock resistance wire in place, or add a ballast resistor if the stock resistance wire has been replaced sometime in the past by you or a previous owner. In any case, if you cannot use the stock wiring including the resistance wire, you either have to run another wire that carries ignition on battery voltage, or you need to remove and replace the resistance wire including the wire from the starter solenoid. The right way IMHO, is to remove and replace the wiring. The easiest way to do this is to open the wrapping on the engine wiring harness. Then remove the bolt in the center of the engine harness connector at the firewall, and unplug the front half of the connector. The wires push in from the front with a metal "barb type" of connection. The barb can be compressed with thin nose pliers, and the wire will pull out from the front. Then you simply unsolder the the barb connection and attach it to a length of 14 gauge wire, and snap it back in to the firewall connector, and plug the connector back onto the firewall, tightening the bolt. Run the wire along the harness, crimp on the proper connection, and attach it to the positive side of the coil. Most if not all Pertronix, need full time battery voltage. GM large cap HEI distributors need full time battery voltage.
Below is a picture of the barb type terminal that clips into the front half of the the engine harness connection at the firewall.