Emoticons (smileys) were invented a long time ago, when the internet was text-based. They were used to show whether the person typing was happy ':-)' or sad ':-('.
Soon a whole array of these 'smileys' were invented, in many different forms.
Soon after the internet became graphical, and instant messaging was born, most users preferred the graphical smileys.
The way instant messengers work, is that whenever they see the text for a smiley in an incoming/outgoing message ':-)' they replace it with a small picture of a smiling face.
Contrary to popular belief, the little picture is not transmitted over the network, only the smiley text is.
When the message reaches the recipient, their IM program replaces any ':-)' with the pictures that are installed on the user's computer.
Miranda IM allows you to change the smileys it uses to replace the text in messages, or it can leave them as they are.
For clarification of the above: You cannot control what smileys the person you are talking to sees in their IM program. You can only control the smileys that you see in yours (if you use Miranda IM).