SMS, or Short Message Service - is the formal name for text messaging. It’s a means of sending short, text-based messages from one phone to another. Though it is most commonly known as text messaging, many cell phone rate plans, including those used for the iPhone, refer to the technology, and the number of messages allowed in a rate plan, as SMS.
The iPhone’s lack of multimedia text messaging – the ability to send photos, videos, and audio – was a controversial feature of the first-generation iPhone.
More on SMS at Wikipedia
Related: 6 Texting Apps for the iPod touch