SMS Explained

Details
SMS means what it says by containing the word 'short' in its name. An SMS message is a text-only message that's 160 characters or fewer, and is sent via mobile device via a cell phone service provider's network. SMS text isn't just sent between mobile phones -- SMS text can also be transferred between fax machines and IP addresses, such as those associated with a computer.
Process
PC Magazine notes that SMS messages are also sent to 'short code' numbers in addition to traditional mobile phone numbers. These are the numbers you commonly see during reality TV shows that invite viewers to text in a vote, and appear as something like '447789.' Whenever someone sends an SMS message, it's routed to a Short Message Service Center, which then routes the message to the correct destination.
MMS
If you've ever sent a photo with your mobile phone, what you sent was not a SMS message. SMS is a text-only technology and does not support multimedia files. Whenever you send a photo, video or audio file with your mobile device, you're sending a MMS -- Multimedia Message Service -- message. Instead of being routed through a SMSC, a MMS message goes through a Multimedia Message Service Center to the proper device.
Competition
There are numerous chat programs that you can use on your mobile device which rely on technology similar to SMS messaging. For example, chat applications such as Google Talk, Skype and Yahoo Messenger allow you to send both text messages and multimedia files, which are sent and received just as quickly as a SMS or MMS message -- as long as the recipient is online. Also, they don't cost any money, as do SMS messages, which you pay for in a mobile phone service monthly plan or per text. However, unlike SMS messaging, which can be exchanged between numbers from various service providers, texts sent via instant messaging require that both parties use the same chat service.