01. WHAT IS A SMART OBJECT?

Smart Objects preserve an image's source content with all its original characteristics, enabling you to perform nondestructive editing to the layer. (Taking away technical terms: smart objects allow to resize an image without losing quality or damaging the original photo data.)

If we transform the layer and make it smaller, and then try to transform it again to bring it back to its original size, it will lose its detail and change its resolution.

But if we convert it into a smart object, the detail and resolution will remain the same:

*Smart objects will increase file size.

002. CREATING A SMART OBJECT

A. LAYER

1) Right-click on the layer you wish to turn into a smart object.

2) Select Convert to Smart Object.

B. MENU BAR

1) Click Layer on the menu bar.

2) Hover over Smart Objects.

3) Click Convert to Smart Object.

003. PROPERTIES OF SMART OBJECTS

As we stated in the definition, smart objects are nondestructive. Not only does that apply to transformations (scale, rotate, skew, distort, perspective transform, or warp), it also applies to adding filters. 

To toggle the filters on and off, click the eye next to the filter layer. You can do this to individual filters too.

We will only convert layers to smart objects, but to learn more about the different types of smart objects and what else you can do with smart objects, use this thread on Adobe Help: