A smart grid is a modernized electrical grid that uses analog or digital information and communications technology to gather and act on information - such as information about the behaviors of suppliers and consumers - in an automated fashion to improve the efficiency, reliability, economics, and sustainability of the production and distribution of electricity. Electronic power conditioning and control of the production and distribution of electricity are important aspects of the smart grid.
(definition source : wikipedia)

Roll-out of smart grid technology also implies a fundamental re-engineering of the electricity services industry, although typical usage of the term is focused on the technical infrastructure.

A common element to most definitions is the application of digital processing and communications to the power grid, making data flow and information management central to the smart grid.
Various capabilities result from the deeply integrated use of digital technology with power grids, and integration of the new grid information flows into utility processes and systems is one of the key issues in the design of smart grids.
Electric utilities now find themselves making three classes of transformations: improvement of infrastructure, called the strong grid in China; addition of the digital layer, which is the essence of the smart grid; and business process transformation, necessary to capitalize on the investments in smart technology.
Much of the modernization work that has been going on in electric grid modernization, especially substation and distribution automation, is now included in the general concept of the smart grid, but additional capabilities are evolving as well.