1. A terminal that has enough computing capability to render graphics or to offload some kind of front-end processing from the computer it talks to. The development of workstations and personal computers has made this term and the product it describes semi-obsolescent, but one may still hear variants of the phrase act like a smart terminal used to describe the behavior of workstations or PCs with respect to programs that execute almost entirely out of a remote server's storage, using local devices as displays.
2. obs. Any terminal with an addressable cursor; the opposite of a glass tty. Today, a terminal with merely an addressable cursor, but with none of the more-powerful features mentioned in sense 1, is called a dumb terminal.
There is a classic quote from Rob Pike (inventor of the blit terminal): “A smart terminal is not a smartass terminal, but rather a terminal you can educate.” This illustrates a common design problem: The attempt to make peripherals (or anything else) intelligent sometimes results in finicky, rigid ‘special features’ that become just so much dead weight if you try to use the device in any way the designer didn't anticipate. Flexibility and programmability, on the other hand, are really smart. Compare hook.