Use the Constraints palette to tell the SmartCursor what types of points you want it to find. Normally, you will have it look for many different kinds of points all at once. The SmartCursor will find the closest point of the type you are looking for, and snap to it. Many constraints are different in 3D than they are in 2D, some are the same. The Constraints palette will change back and forth when you switch tools.
The constraints combine with each other in order to make more complex constraints. For example, the Snap to Object option will combine with the Grid option to find points which are on the edge of the object and on a grid line. The constraints also combine with the Data Display Bar input in the same way.