I saw them all over the city every day when I lived in Stuttgart. They are good commuter cars in that type of environment.
As far as mileage goes:
The Smart ForTwo's big selling point is going to be fuel economy. For the current version, the company estimates a combined city/highway fuel mileage of about 40 miles per gallon, according to DaimlerChrysler. (The 60 mpg figure sometimes reported is for the diesel-engine version.)
These aren't hybrids, either.
I wouldn't feel comfortable at all travelling on interstates in something like this, but for city driving (without the need to haul things, other than yourself), they make some sense.