Depending on how you use Adobe Photoshop, Smart Objects may be one of your favorite features.
What are Smart Objects in Photoshop?
For example, as you can see above, the image on the left is the original image, the image in the middle is a smart object that has been resized up to 10% and then resized again, while the very blurry image on the right is rasterized layer which resized to 10% and then the size changed again. As you can see, the smart object retained the original image throughout the transformation, while the rasterized layer distorted the image.
This means that if you create a composite image, you can move, resize, crop, filter, use adjustment layers, and alter how things look without fear of doing some changes which can not be undone. Conversely, if you work with rasterized layers, the only way to try something new is to undo everything you have already done and start from scratch.
On the other hand, the bonus of a rasterized layer is that you can edit them directly without the annoying dialog boxes.
How to stop Photoshop from always creating Smart Objects
By default, each time you add an image or vector to a Photoshop document, it is embedded as a smart object.
To change this behavior so that integrated as rasterized layers, go to Edit> Preferences General on PC or Photoshop> Preferences> General on Mac.
Uncheck "Always Create Smart Objects When Placing" and click "OK".
How to convert a Layer to a Smart Object
Of course, even if you add a rasterized layer to a Photoshop document, you can turn it into a smart object if you want to do some non-destructive editing. Just do it right click level and select “Convert to Smart Object”.
Source of information: howtogeek.com