Stands for "Simple Mail Transfer Protocol." This is the protocol used for sending e-mail over the Internet. Your e-mail client (such as Outlook, Eudora, or MacOS X Mail uses SMTP to send a message to the mail server, and the mail server uses SMTP to relay that message to the correct receiving mail server.
Basically, SMTP is a set of commands that authenticate and direct the transfer of electronic mail. When configuring the settings for your e-mail program, you usually need to set the SMTP server to your local Internet Service Provider's SMTP settings (i.e. "smtp.yourisp.com"). However, the incoming mail server (IMAP or POP3) should be set to your mail account's server (i.e. hotmail.com), which may be different than the SMTP server.