When you say that something is `smoke and mirrors’ what you mean is that it is a lie; it is a distortion of the truth. It is a trick employed by someone to deceive or confuse people. By drawing attention away from the truth, an attempt is made to make people believe that the situation is better than it actually is. When you say that a politician’s argument is `smoke and mirrors’, what you mean is that it lacks substance.
Example: Smoke and mirrors made the stock market look healthier than what it really was.
The expression comes from the world of magic. When a magician performs his tricks on stage, he often makes use of smoke and mirrors to make the impossible appear possible; he uses smoke to divert the audience’s attention.