a.k.a. emoticon, text face, happy face, sad face, frowny face, pictogram, pictograph:-)
A smiley is a sequence of typed characters that creates a rough picture of something, such as a facial expression. If you don't see the picture in the smiley shown above, try tilting your head to the left - the colon represents the eyes, the dash represents the nose, and the right parenthesis represents the mouth.
Numbering in the hundreds, smileys are used to indicate delight, sadness, comedy, or frustration. The most popular one is the smiling face shown above. It's used in e-mail or chat rooms to say "If you could see me now, I'd be smiling ;-)" Someone once told me that women generally use this one :-) and men prefer the one without the nose :)
Smileys, also known as emoticons (meaning icons that represent emotion), grew out of the need to display feeling in the two-dimensional, online, written world. When speaking face-to-face (F2F), a person's facial expressions help you understand the meaning of what he or she is saying. Smileys are an attempt to bring that extra nuance to online communications by composing a face out of ASCII characters.
Some smileys don't require you to tilt your head to see them. There's a new group of ASCII icons called assicons, as well as another group, called straight-on smileys. There are also elaborate images, known as ASCII art, and "little typed doo-dads" (known in some cases as dag-tags) are often seen in sig files.
Smileys usually follow after the punctuation (or replace the punctuation) at the end of a sentence, but they can also be inserted in the middle of a sentence. A smiley is meant to tell someone what you really mean when you make an offhand remark ;^)
The official birthdate of the smiley is September 19, 1982. It was created by Scott E. Fahlman at Carnegie Mellon University. The two original "glyphs" by Scott were :-) and :-( Since Scott posted his first smiley proposal, many other smileys have been devised by many others.
Check out NetLingo's special smileys page for a closer head tilting look, and start using one for yourself 0*-)