Choosing compression settings by hand means guessing, checking and guessing again. The smart optimiser does that work for you: it looks at the image, decides how much it can be compressed before quality suffers, and produces the smallest sensible file. It is the fastest route to lighter pages when you have a website to speed up rather than time to spend tuning.
Normal compression applies the level you choose. The optimiser inspects the image first and picks a level that suits its content.
Indirectly, yes. Lighter images make pages load faster, and page speed is part of how search engines judge experience.
You can always fall back to the standard compressor if you want to set the level yourself.
Photographic images benefit most. Flat graphics and icons are usually already small.