Smartlist Favorites are great when you want to come back to a set of data that you've used before. They are also useful in regular lookups. For example, if you a regularly use certain set of accounts, you can create a Smartlist favorite with those accounts. Then, when you hit the hourglass to lookup accounts, pick the arrow in the upper left and hit Favorites. All your Smartlist favorites are there to better control your lookups. Simply pick the one you want and you have a much smaller list of accounts to work with.
This is not limited to accounts. It works throughout the system with Accounts, Vendors, Customers, just about anything you can lookup in a Smartlist.