What a Smart Object is
A Smart Object wraps a layer in a container that preserves the original data. Scale it down to 10% and back up and it is still sharp, because Photoshop re-renders from the source rather than from the last result. Filters applied to it become Smart Filters — re-editable, maskable and removable.
The four rules
- Adjustment layers, never Image → Adjustments. The menu version bakes the change into pixels permanently.
- Masks, never the Eraser. See layer masks.
- Smart Objects before filters or transforms. Convert first, then sharpen or blur.
- Empty layers for retouching, with tools set to sample All Layers.
Why this is not just tidiness
The practical payoff comes when the brief changes. A client asks for a crop, a different colour, less aggressive skin work — with a non-destructive file each is a two-minute change. With a flattened file each is a redo. The habit costs nothing while you work and saves the whole edit later.
Linked Smart Objects
Place a file as a Linked Smart Object and it stays connected to the file on disk. Update the source and every document using it updates. This is how you keep a logo consistent across a set of layouts.
The costs, honestly
Smart Objects make files considerably larger and slower, since Photoshop stores the embedded original alongside the rendered result. On a big multi-layer composite this is genuinely noticeable. You also cannot paint directly on a Smart Object — you have to open it, edit and save, which is a real interruption during retouching.
So the sensible compromise: Smart Objects for anything filtered, transformed or placed, and ordinary pixel layers for hand retouching. Converting every layer on principle will slow you down for little benefit.