What is smart pricing
Smart pricing is the mechanism Google utilizes to determine how much an Adwords advertiser pays for a click on the fly, basing the price on probability of it turning into actual business action, thus protecting advertisers' interest.
For example, some love story book ad is being displayed on a sci-fi book site, as you can understand, Google predicts that visitors who click through to the landing page is less likely to buy the love story book simply because they are sci-fi story lovers, thus reduce the amount advertiser has to pay for the click.
However on the other hand, Adsensers often understandably complain how the they are being smart priced thus gaining less revenue. That's because Google constantly monitor all websites serving ads through the Adsense program in protection of advertisers. If any of them is directing traffic that's hard to convert, the site is very probably smart priced.