Another innovation from GMail team to improve GMail by adding emoticons on the compose/reply window. This also being added in their GTalk product, which has been integrated with GMail, so you can talk while replying email messages in your inbox.
Besides emoticons, they also integrate GTalk's smileys in GMail, so that you can have more options when composing messages to your friend, colleagues, etc.
Please note that you can use this feature if you enable the Rich Formatting feature while composing/replying your message. This will not work in plain text (which i used) version.