The technical name for a smiley is an upper lip frenulum piercing, but it got its nickname because you can only see the piercing when someone smiles. The piercing is through the piece of skin that connects your gums to your upper lip. (You can feel it with your tongue!) Most people who get smileys choose a ring that will then look like a loop when revealed.
Personally having something on my inner upper lip would likely annoy me in the long run, but I have to admit that this piercing looks pretty cool on the people who choose to rock it - and it's definitely a cute way to remind yourself to smile.