In a nutshell, a Smart Folder contains items in the folder based on search criteria that you set in the preferences of the folder instead of grouping the contained items by location, like a regular folder. This makes it very easy to better organize your Mac. Say, for example, that you have a lot of word documents or keynote presentations spread out in different folders on your Mac but you want to get them all in one location without physically moving them on the hard drive, then making a smart folder is your solution.