Ivo Jansch has a recent post to his blog talking about one of the great debates in the world of PHP - is the language by itself a good templating language (versus using something like Smarty)?
I think I've said it before. The tool you use should depend on the job you're trying to do. So to say that Smarty is wrong just because it is, does not feel right. I agree that in many cases PHP can be used as a template language just fine, but there are situations where a Smarty template (or any other templating engine) is just that more pleasant.
He's comparing them on aesthetics alone, showing two snippets of code - one templated via PHP and the other in the format that Smarty uses to generate a simple chunk of XML. For more examples of the Smarty format, check out their documentation.