A smiley is often used in text communications to convey an emotion with a message.

Smilies are used in text messages in the same way voice changes and facial expressions are used in face-to-face or telephone conversation.

For example, if you were joking with someone and send a text message of "Idiot!" the person receiving your message may think you are making a rude comment to them. If you send the same message with a "happy smiley" :)  following, the person would then understand you were "smiling" - or joking when you said that, and not misinterpret your intent.

To create a smiley you use your standard keyboard characters and punctuation marks. When viewing text smilies, they are all sideways.

Here are some basics to get you started in understanding what smilies are:

The close bracket represents a sideways smile ) 
Add in the colon and you have sideways eyes : 
Put them together to make a smiley :)
Use the dash - to add a nose :-)
Change the colon to a semi-colon ; and you have a winking smiley ;) with a nose ;-)
Put a lower case o (halo) on top and now you have a winking, smiling angel 0;) with a nose 0;-)
Use the letter 8 in place of the colon for sunglasses 8-)
Some chat and instant message programs automatically translate text smilies into graphics.
In AOL Instant messenger (AIM), for example, if you type out smilies for "happy face" followed by "sad face" followed by "cool sunglasses" you would enter the following characters::) :( 8-)
Once you've entered the text however, AIM converts the smiley text to graphics, if it can recognize the smiley pattern, and what you see on the screen will be:

Here are few examples of commonly used smilies and their meaning...