It's about the Iron Rule #2: Always end your movement in cover. If there is no cover, create it.
But truth be told, I only use smoke grenades when the mission is tough... and use them heavily in the most difficult ones. Too bad they don't protect from Psi
In situations where, for example, a unit is in the line of fire of an enemy without enough time units to move to cover (pretty much guaranteeing he's going to get fired upon), you can toss smoke and it will more than likely save your soldier's life.