I love templates. I was able to make some changes to the site formatting in mere minutes thanks to templates. Change two files, and it all propagates throughout the site. Lovely.
I use a modified version of the Template class from the PHP Base Library for just about any PHP programming project I work on any more. I’ve looked into other, similar classes for PHP but haven’t really found anything that comes close to the PHP Base Library Template.
I’ve never gotten into using Smarty largely because from what I know of it, it doesn’t fit my needs—it’s overkill for a templating system. (Caveat emptor. I could very well be wrong here.) Here’s a hint: not everything you use a template for needs to be/should be/can be compiled into PHP, which is what Smarty does. I can use my hacked Template class to build any kind of files, like my RSS file—not just PHP and HTML. Plus it’s very easy to use and it’s not burdened down with all the additional template scripting code (yeah, code) that Smarty allows.
For my money, if you’re working with Smarty, you might as well just forego it entirely and code in native PHP. But that’s just me.